Middle Market Growth - April 2015

Growth MIDDLE MARKET

// APRIL 2015

AUA: DIGGING INTO

Demographics ESOPs PRESENT UNTAPPED EXIT ROUTE FOR PE SELLERS A QUALIFIED OPINION: TECHNOLOGY FUTURIST SALIM ISMAIL

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EXECUTIVE SUMMARY GARY LABRANCHE // ACG Global President & Chief Executive, FASAE, CAE

Changing Demographics and the Middle Market

W

elcome to the April issue of Middle Market Growth. Some of you are reading this issue digitally, while others are enjoying a special-edition print version, delivered just in

time for the 44th annual ACG InterGrowth® conference in Orlando.

This edition of the magazine is dedicated broadly to the theme of demographic trends, important shifts such as continued growth of the U.S. Hispanic population—a group with exponential purchasing power; the aging baby boomer generation (admittedly, I fall into this group, as do many of our members) and the rise of millennials, the 20- and 30-somethings who outpace most of us in their rampant adoption of social media and other digital technology.

Tapping into these trends is increasingly important for middlemarket firms and those who serve and advise them; our cover story demonstrates how one such firm, New York-based AUA Private Equity Partners, has targeted midsize companies catering to Latinos, as well as those with retirement-aged owners seeking to partner with experienced operators to transition profitably out of their businesses.

ACG, too, is tuned into these macro social trends—that’s one reason we’re doing more to attract younger professionals (take note of some of the chapters featured in ACG@Work and how they’re adapting their programming for millennial members).

If you pay attention to ACG’s overall marketing and message delivery, you’ll see many more opportunities to engage through social media and other collective forums; our newly redesigned Middle Market Growth website, for instance, offers many opportunities to make your voice heard.

Making the voice of the middle market heard is an integral part of ACG—we had great success earlier this year at our Middle-Market Public Policy Summit in Washington, where the association focused on a collaborative approach with legislators for solutions to corporate taxation, the regulatory environment, aging U.S. infrastructure and workforce challenges, among many other issues.

I’m certain you’ll hear much about these and other issues facing the middle market at InterGrowth. You’ll also find plenty of opportunities for the critical networking you depend on at this event. And if changing demographic trends are important to you, you won’t want to miss a keynote address from technology futurist Salim Ismail, the subject of this issue’s A Qualified Opinion—his message may just influence your approach to business in the near term.

In the meantime, enjoy the magazine and I’ll look for you in sunny Florida. //

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .® To d a y ’s f a s t - p a c e d m a r k e t r e q u i r e s a n e d g e . A C G G l o b a l P a r t n e r s prov ide y o u wit h t h e e x pe r t is e a n d be s t pr a c t ic e s n e e de d t o c l o se t he d e a l .

L E A R N M O R E A B O U T A C G PA R T N E R S H I P S , V I S I T A C G . O R G / PA R T N E R S H I P S © 2015 Association for Corporate Growth. All Rights Reserved.

EXECUTIVE SUITE ANDREW H. MOSER // Co-Founder, President and CEO, Salus Capital Partners

Q

WHAT IS SALUS CAPITAL PARTNERS? ANDREW H. MOSER: Salus was founded in 2011 by a team

of veteran commercial lending, investment and retail industry professionals focused on building a new kind of lending platform. We provide assetbased loans to the middle market that allow companies to tap into the true value of their assets. Our flexible capital solutions are tailored to meet financing for situations ranging from emerging growth, recapitalizations, mergers and acquisitions, DIP financing and middle-stage turnarounds.

Since launching, Salus has provided more than $1.7 billion in loan commitments to more than 60 companies and currently employs nearly 50 professionals. Our team’s retail and consumer industry experience has helped Salus quickly become recognized as the go-to lender in the retail industry.

Q

HOW IS THE SALUS LENDING PLATFORM UNIQUE? AM: There has been little innovation in asset-based lending

since it caught on in the mid-90s as an alternative for companies having trouble obtaining traditional financing, but with liquid assets that could be leveraged. Today, most asset-based lending follows a familiar formula that doesn’t accommodate companies dealing with complex business challenges or performance issues. Commercial lenders generally make

BIO //

decisions based on a company’s balance sheet without putting much

ANDREW MOSER has 20 years of experience in asset-based lending. As president and CEO of Salus, he is responsible for the overall development and execution of corporate strategy, business development, leadership and team building.

weight behind its business plan, leaving many promising companies without access to credit.

At Salus, our team has worked tirelessly to flip the traditional approach to asset-based lending on its head by looking at every company’s financing needs as a completely unique opportunity. We pride ourselves on conducting rigorous due diligence, while also being open-minded, collaborative and creative in developing solutions to help borrowers meet their business needs for the long term. We consider a company’s previous performance, but we focus on its strategy for the future and the leadership team’s ability to navigate current challenges.

Continued on next page

EXECUTIVE SUITE ANDREW H. MOSER // Co-Founder, President and CEO, Salus Capital Partners

Q

SHOULD ABL BE CONSIDERED DURING TIMES OF GROWTH?

AM: Many think of asset-based lending as a solution for companies in distress; however, ABL can be a great solution for companies in search of growth capital. We work with a number of growing retail brands looking for liquidity to develop e-commerce capabilities, expand their footprint of stores and distribution centers or improve existing storefronts. Others are looking to grow through acquisitions and need financing.

Besides an ability to provide more liquidity than other types of financing, asset-based lenders are often a valuable source of strategic counsel. A good asset-based lending partner will help a borrower access the resources and expertise needed to take its business to the next level.

Another positive byproduct of ABL is an improvement to borrowers’ financial reporting practices—often required to participate in the collateral-monitoring process—which puts management in a stronger position to judge its performance and operating metrics and plan for the future.

Q

HOW ARE DEMOGRAPHIC OR BEHAVIORAL SHIFTS IMPACTING MIDDLE-MARKET RETAILERS?

AM: There have been significant shifts in consumer behavior with millennials’ strikingly different approach to shopping than the generation before them. Demand for the traditional mall environment has waned and teens and young adults have become more value-conscious. Today’s mobile, social world has sped up the trend cycles, forcing retailers to be more nimble in their inventory management practices than in years past.

The most successful retailers constantly analyze key market indicators and tap into social media for intelligence. Platforms like Pinterest, Instagram and Twitter are rich with real-time information on the products and trends that consumers are gravitating to.

Changing consumer behavior, demographics and inventory management mean lenders need to be equally nimble. Demand for more flexible solutions is posing a challenge for traditional lenders as they face increasing regulatory requirements that force them to evaluate borrowers through a very restrictive lens. Nontraditional lenders like Salus are stepping in to fill the void and help companies focus on what matters most— the future of their business. //

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MIDPOINTS RANDY SCHWIMMER // Founder and Publisher, The Lead Left

Demographics Are Destiny

W

ho am I? According to the U.S. Census Bureau, I’m a baby boomer.

So are 78 million other Americans. Unlike the generations

after us—Generation X and the millennials—boomers are now entering retirement; the youngest just turned 50. Over the next 17 years,10,000 boomers will retire every day.

Here’s another fact: Nine million of the total 15 million businesses in the United States are owned by boomers (or older). Of those, 4 million— two-thirds of all companies with employees—could change hands. For both buyers and sellers, these numbers have profound implications.

BIO //

Randy Schwimmer shares his perspectives in MidPoints each issue.

A former member of senior management and investment committees for two leading middle-market debt platforms, he is also founder and publisher of The Lead Left, a weekly newsletter about deals and trends in the capital markets.

For one thing, this will be the greatest transfer of wealth in history. For another, most business owners have not adequately planned for the transition. Finally, even if they do, the next few decades will witness an enormous glut of boomer exits, making valuations and execution problematic.

Near the youngest end of age demographics are the millennials. Born after 1982, they will surpass boomers this year as the largest cohort in the U.S. So it makes sense they would be candidates to inherit or buy boomer businesses. But this generation’s members, products of the Internet age and social media, have developed different values than their parents.

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According to a recent Deloitte survey, most millennials believe business leaders focus too much on “products and profit” and not enough on “people and purpose”—that is, building a healthy society is just as important as growing a company. To appeal to younger buyers or managers, boomers preparing to sell their companies need to understand those attitudes and build businesses that speak to the younger generation’s core values.

Continued on next page

MIDPOINTS RANDY SCHWIMMER // Founder and Publisher, The Lead Left BOOMER-LED SPONSORS NEED TO CHANGE HOW THEY THINK AND OPERATE IN ORDER TO SUCCESSFULLY MANEUVER THIS GENERATIONAL SHIFT.

For private equity firms—the capital providers facilitating this transfer— the lesson is clear: Understanding this target audience is critical. When millennials replace boomers as our society’s agenda-setters, the drivers of the U.S. economy will change. How do 30-year-olds see the world?

How were they educated? How do they think about their health, their lifestyle and their careers?

The survey also found fewer than four in 10 millennials aspire to become the “leader or most senior executive within their current organization,” and only 11 percent suggest their next career move would be to start their own business. Elise Chowdhry, managing principal at Optimum Advisors LLC, says: “The study suggests this generation may need to redefine leadership in order to embrace business ownership and become viable buyers for the sponsor community.”

Like any functional family, these “kids” and “parents” each have strengths (M=tech-savvy; B=team players) and weaknesses (M=work ethic; B=adaptability). Boomer-led sponsors need to change how they think and operate in order to successfully maneuver this generational shift— it’s not just what to sell their successors but how to sell to them.

Demographics are destiny. The future identity of our population will define our commerce, culture and character. But one intriguing question remains: As millennials shoulder more responsibilities for growing businesses, will their values begin to resemble those of the boomers?

It’s a scary thought, but eventually, I guess, we all become our parents. //

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Growth MIDDLE MARKET

// APRIL 2015

Cover and story photography by Brad Trent

FEATURES

AUA: Digging Into Demographics AUA Private Equity Partners is achieving success by investing in companies catering to the growing U.S. Hispanic market. Meanwhile, by building relationships with aging owners, the firm is poised to benefit as baby boomers transition out of their family businesses.

Read more.

“WE CAN GET INTO PLACES WHERE OTHERS AREN’T ABLE TO BECAUSE OF OUR BACKGROUND AND OUR HISTORY.” // ANDY UNANUE, MANAGING PARTNER, AUA PRIVATE EQUITY PARTNERS

ESOPs: The Lesser-Known PE Exit In addition to traditional exit strategies for private equity investments, ESOPs may be an option to consider in an active exit environment.

Read more.

TABLE OF CONTENTS

PRESIDENT & CEO Gary LaBranche, FASAE, CAE glabranche@acg.org

VICE PRESIDENT, COMMUNICATIONS & MARKETING Kristin Gomez kgomez@acg.org

EDITOR-IN-CHIEF Deborah L. Cohen dcohen@acg.org

IN EVERY ISSUE Executive Summary Executive Suite MidPoints

by Randy Schwimmer

DEPARTMENTS THE ROUND • ACG Summit Spotlights Policy and Push for Collaboration • Aging Owners Present Opportunity for PE in Infrastructure Read more.

Face-to-Face Quick Takes The Ladder B-Side It’s the Small Things The Leadership

A QUALIFIED OPINION Salim Ismail, Executive Director of Singularity University, Discusses Technology, Innovation and Disruption, and How Companies Can Adapt.

ACG@WORK • Young ACG Dealmakers on the Rise in Vancouver Read more.

2014 Folio Eddie Digital Winner, Standalone Digital Magazine 2014 Apex Award, New Magazine, Journal & Tabloid

Kathryn Mulligan kmulligan@acg.org

DIRECTOR, CREATIVE AND BRANDING Brian Lubluban blubluban@acg.org

VICE PRESIDENT, EVENTS & PARTNERSHIPS Christine Melendes, CAE cmelendes@acg.org

Custom media services provided by Network Media Partners, Inc.

Read more.

• Engaging Millennials on the Job

2014 Association TRENDS All-Media Silver Award, Monthly Trade Publication

ASSOCIATE EDITOR

THE PORTFOLIO The latest middle-market trends and thought leadership written exclusively by a team of expert ACG Global featured firms.

Read more.

Association for Corporate Growth 125 South Wacker Drive, Suite 3100 Chicago, IL 60606 ACG Membership: membership@acg.org www.acg.org Copyright 2015 Middle Market Growth®, InterGrowth and the Association for Corporate Growth, Inc. All rights reserved.

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FACE-TO-FACE CONNECT TO YOUR NEXT DEAL

SAVE THE DATE // Visit eurogrowth.org to sign up for event updates.

Global M&A Deal Flow. Two Days. One Event.

EuroGrowth® Returns in November, Moves to Amsterdam Cross-border dealmaking is fast becoming an essential part of global business. In fact, 82 percent of middle-market companies expect more than 20 percent of their sales growth to come from foreign markets, according to a survey from the National Center for the Middle Market. The secret to successfully navigating the intricacies of global deal flow—whether establishing international joint ventures, entering emerging markets or securing add-on acquisitions—is knowing the right people, the right areas in which to invest and the right practices to bring it all together.

EuroGrowth will be back again for a third year, gathering more than 200 financial professionals and capital providers from all segments across Europe and the globe. Take advantage of two days of uninterrupted networking and leading-edge sessions on best practices, analysis and discussions about global M&A. ACG EuroGrowth 2015 will be held at the Mövenpick Hotel in Amsterdam on Nov. 16-17. There’s no better way to tap into the global middle-market community than EuroGrowth. Save the date and register for updates at www.EuroGrowth.org. Consider extending your trip to attend SuperInvestor 2015 on Nov. 17-20 for a full week of deal flow. //

FACE-TO-FACE CONNECT TO YOUR NEXT DEAL

CHAPTER EVENTS Get involved! This spring, ACG chapters across the globe will host hundreds of local events. Check out what’s happening at your local chapter, register and join in on valuable educational and networking opportunities.

ACG Central Texas Private Equity Two-Step in San Antonio Left: Omni Water Solutions CEO Warren Sumner responded to audience questions following a panel discussion. Right: Cris Eugster, executive vice president and chief generation and strategy officer of CPS Energy, described his firm’s recent activity in the renewable energy sector.

ACG Boston Chapter View Calendar

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ACG Indiana Chapter View Calendar

ACG Maryland Chapter View Calendar

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Had a newsworthy chapter event?

Send a 150to 200-word summary and high-resolution photos to Associate Editor Kathryn Mulligan.

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L E A R N M O R E A B O U T A C G PA R T N E R S H I P S , V I S I T A C G . O R G / PA R T N E R S H I P S Š 2015 Association for Corporate Growth. All Rights Reserved.

THE ROUND NEWS THAT MATTERS EXPERT PANEL // From left, Rep. Mike Quigley, Gretchen Perkins of Huron Capital Partners and Rep. Ron Kind.

ACG Summit Spotlights Policy and Push for Collaboration Tax reform, aging U.S. infrastructure and the polarized political landscape were among many topics explored at the ACG Middle-Market Public Policy Summit.

Part of ACG Leadership Week, the Washington, D.C., event drew more than 100 attendees eager for updates on legislation affecting the middle market.

“Middle-market companies really help drive the economy,” said Rep. Steve Stivers, an Ohio Republican and one of several legislators to address the conference. “They didn’t lay off, they actually grew. That is the big public policy argument you have, and you should make.”

Legislators and the public at large need to gain a better understanding of the middlemarket sector’s contribution to the economy and ways policy initiatives can fuel momentum for midsize businesses, he said, noting his support for legislation to extend the ExportImport Bank and promote capital formation with bills such as the Small Business Capital Access and Job Preservation Act. “It’s really important that everybody is in the same boat and rowing in the same direction in this country,” said Stivers, speaking at the Park Hyatt Washington.

The need for compromise was echoed by Reps. Mike Quigley, D-Ill., and Ron Kind, D-Wis., part of a group of moderate legislators known as the “New Democrats” due to their willingness to reach across the aisle on issues such as fiscal policy.

Continued on next page

THE ROUND NEWS THAT MATTERS “The new normal can’t be frustration, sequestration and threatening to raise the debt ceiling,” said Quigley, who has defied his party’s thinking by favoring the maintenance of carried interest for alternative investments such as private equity funds and advocates simplifying the corporate tax structure.

“Everything that gets done in this town gets done down the middle,” he said.

Ailing U.S. infrastructure and the lack of alternatives to two- and four-year postsecondary education degree programs were among the issues he highlighted to be addressed in order to keep U.S. businesses competitive.

What’s Working and What’s Not Kind called for a willingness on the part of Congress to amend sweeping legislation such as the Affordable Care Act and Dodd-Frank.

“Sometimes you’ve got to learn what’s working and what isn’t and make changes along the way,” he said, noting that he favors legislation removing impediments to capital deployment. He later added: “We have an antiquated tax code that’s failing us.”

Amy Walter, national editor of the Cook Political Report, underscored the polarized party landscape in the United States. But changing U.S. demographics, particularly a decline in older white voters as baby boomers age and minority populations such as Hispanics gain a stronger political voice, will be a determining factor in the 2016 elections, she added, noting politicians need to find ways to broaden their appeal.

“People hate Washington now more than ever,” Walter said.

Helping to decode the shroud of mystery surrounding financial regulation was Marc Wyatt, deputy director with the SEC’s Office of Compliance Inspections and Examinations.

Some 80 percent of the private equity industry “is doing the right thing,” said Wyatt, who stressed that proactive communication with the agency is the surest way for a PE firm under review to avoid any surprises.

Wyatt, a former investment banker and private equity professional, conceded that the SEC does not “have the best customer service relationship mentality” but is improving its interaction through extended outreach to industry players around the country.

Indeed, increased cooperation with government was an overriding theme of the summit.

Rikki D. Amos, a director with the Public Affairs Council—a nonpartisan group representing public affairs professionals—highlighted the importance of midsize companies and capital providers developing relationships with their congressional delegations and staff.

“Keep the conversation going and continue to tell your story,” she said. // —DLC

To learn more about ACG’s public policy efforts, contact Amber Landis, ACG Global senior director of public policy, at alandis@acg.org.

THE ROUND NEWS THAT MATTERS

Aging Owners Present Opportunity for PE in Infrastructure The demographic challenge facing business owners in the infrastructure services sector— which produces everything from steel girders to energy pipelines—is acute. The profile of the scrappy, entrepreneurial and strong-willed family business owner has come to represent the industry stereotype, and for good reason.

The middle market overflows with firms operated by a dominant patriarch—or his second or third generation progeny—favoring maximum near-term profitability over longer-term investment in machinery and heavy equipment, human capital and corporate infrastructure.

This capital allocation decision presents one of the industry’s greatest challenges and one of private equity’s greatest untapped opportunities.

For those infrastructure firms that prosper through the inevitable business cycles, industry accolades and financial rewards can be considerable. Yet the ultimate reward—a capital transaction and the successful transition of ownership—eludes a great number of business owners along with private equity investors.

Additional obstacles abound: the commonly held industry perception that middle-aged talent is hard to find, itself a result of the boom-and-bust cycle that drives talent to more stable industries; little understanding of the benefits of internal leadership development; and the unwillingness of risk-averse business owners to trust outsiders.

Continued on next page

THE ROUND NEWS THAT MATTERS The period of 2009 to 2014 magnified these trends in a way not experienced since the recession of 1980-1981. With the Great Recession just beginning to fade from memory—or at least as a central preoccupation—aging owners appear increasingly focused on finding solutions. However, in many circumstances they remain hamstrung by capital allocation decisions made years ago.

For private equity to capitalize on this dislocation, firms must be able to forge relationships with reluctant business owners. Although less concentrated in the infrastructure sector, the most promising of today’s professional executives bring classic management techniques, deep technical expertise and relationships with customers and key stakeholders, including lenders and surety providers.

A private equity firm’s relationship with an accomplished executive offers sellers many benefits when investing in the infrastructure services sector, including more immediate improvement in business quality and a foundation from which to build enduring value.

Perhaps most importantly, a knowledgeable operating executive can contribute to a higher certainty of close, given the executive’s fundamental understanding of the contracting business model and the considerations of other key stakeholders.

Continued growth of the aging ownership cohort is inevitable; so is the potential opportunity for private equity investors seeking alternatives to the expensive auction scenarios that characterize today’s middle market. Capitalizing on the opportunity, however, requires a commitment to identifying resources in advance and offering sellers a solutionsoriented approach to a problem decades in the making. // —S. Matthew Katz is a managing director with FdG Associates, a New York-based private equity firm focused on partnering with management in recapitalizations and management buyouts of middle-market businesses.

THE ROUND NEWS THAT MATTERS

VERTICAL VIEW // DEMOGRAPHICS DRIVE DEALS Capital investment in elder care has yet to reach its 2006 high of $2.9 billion; 2013 saw only $635.2 million of capital investment.

2.9

$ Among the largest deals catering to changing American tastes was the 2012 take-private buyout of the fast-casual restaurant P.F. Chang’s China Bistro

by Centerbridge Partners for $917.7 million.

BILLION

The number of deals involving women-owned companies has risen consistently since 2009, to 276 in 2014 compared with 118.

Venture capital investment in language-learning software reached a zenith in 2014 with $160.6 million invested.

Only $5.8 million was invested in 2005.

In the last decade, 2012 saw the most capital exited in the consumer electronics space—$10.5 billion— while 2014 had the highest number of exits at 35.

Since 2004, the MidAtlantic region saw the most middle-market elder care deals—49—followed by the Southeast with 47.

Deal flow in the consumer electronics sector has risen steadily since 2011, to 78 deals in 2014 from 44.

“Investors have been gearing up for aging baby boomers for some time. Much of the invested capital was deployed prior to 2009, and investors may have a harder time finding opportunities to invest at the multiples available five years ago.”

—Daniel Cook, senior data analyst, PitchBook

All stats are from PitchBook for the middle market (deal values between $25 million and $1 billion).

SUPERMARKET // AUA invested in Associated, a group of independently operated grocery stores.

AUA: DIGGING INTO

Demographics

BY SANDRA SWANSON

Photos by Brad Trent

AUA PRIVATE EQUITY PARTNERS // Headquarters: New York, NY Founded: 2012 Managing Partner: Former Goya Foods Inc. COO Andy Unanue Focus: Hispanic-oriented and familyowned businesses Portfolio: Blue Star Media, Associated Supermarkets, Brighter Dental Solutions, Two-Twenty Records Management, eSchool Data, Trufoods Website: www.auaequity.com/

G

rowing up as part of Goya, the largest Hispanicowned U.S. food company, Andy Unanue learned some vital lessons. “It was extremely important for my understanding of family business and the Hispanic market,” says Unanue, managing partner of AUA Private Equity Partners. Founded by Unanue’s grandfather in 1936, Goya now produces more than 2,200 products. The fourthgeneration family business traces much of that success to a nuanced appreciation of Hispanic consumers.

Those two threads—Hispanic-oriented, family-owned— help define AUA’s investment strategy. They mirror Unanue’s resumé and those of his partners, Steven Flyer and David Benyaminy. The strategy is also grounded in demographic trends: the burgeoning Hispanic market and the aging baby boomer population, which is leading to ownership transitions at family-owned businesses. Says Flyer: “It’s really matching capability to opportunity.”

POWERFUL PARTNERSHIP // From left, AUA’s Unanue, Benyaminy and Flyer with Associated’s Zulema Wiscovitch and Robert Sigel.

When Flyer and Benyaminy met Unanue in 2009, their complementary approaches to evaluating opportunities soon became clear. Benyaminy’s banking background gives him a highly analytical take on financials, while Flyer’s legal training honed his risk assessment. When they tuned into Unanue’s operational focus, it was an eye-opener, Benyaminy says.

“He wasn’t just another guy who worked at a bank for 15 years,” he says.

“More and more, it’s difficult to make money by being financially creative.

You need to have operational expertise to make companies better.”

AUA launched in 2012, and by December 2014 its first fund had more than $135 million in capital commitments. The GP has the second-largest stake in the fund, at $27 million.

It’s not exactly the partners’ first financial rodeo. They like to note that during the past 18 years, they’ve cumulatively invested $777 million in 27 transactions. Prior to AUA, Flyer and Benyaminy worked on several deals together, including one involving the popular El Pollo Loco restaurant chain. And before the AUA fund was formalized, the three founders completed three deals together: Brighter Dental Care LLC, Two-Twenty Records Management LLC and eSchoolData LLC.

“WE ALSO LOOK AT GENERATIONAL TIME HERE IN THE U.S.—A FOURTH OR FIFTH GENERATION MEXICAN OR PUERTO RICAN IS VERY DIFFERENT THAN A FIRST GENERATION (CONSUMER).”

Andy Unanue Managing Partner, AUA Private Equity Partners

Each year, AUA looks at 400 to 500 opportunities, which partners expect to yield just two or three transactions.

As part of the hunt, they attend trade events such as the Fancy Food Show in San Francisco. “It’s sort of a grassroots effort for meeting companies,” Flyer says. “Over two to three years, these things can turn into actual opportunities for our firm.”

With two deals currently in its fund—Associated Supermarkets and Blue Star Media—the firm concentrates on consumer products and services, and media and business services. Those opportunities must align with growth in the U.S. Hispanic population or baby boomer owners looking to cash out.

The purchasing power of Hispanics is forecast to reach $1.6 trillion by 2016. By 2020, Hispanics will represent nearly 20 percent of the overall population, according to census estimates. To fully explore that potential, AUA aligns itself with one of Unanue’s favorite aphorisms about Latinos in North America—unified by language, but differentiated by tastes and foods. Other companies may recognize that Puerto Rican culinary preferences differ from those of

Cubans, but Unanue says AUA dives deeper into the data.

“We also look at generational time here in the U.S.—a fourth or fifth generation Mexican or Puerto Rican is very different than a first generation (consumer),” he says. “And where they live in the country, that impacts as well.”

ALL IN THE FAMILY AUA’s other demographic guide—baby boomers reaching retirement age—isn’t a consumer trend, but it does affect business ownership. A 2010 PwC study reported that in the five years through 2015, 27 percent of family businesses expected to undergo ownership transitions.

That’s noteworthy, particularly since about 85 percent of U.S. businesses are family-owned.

Even when companies appear ready to sell, they may feel skittish about private equity. To build rapport with target companies—whether Hispanic-oriented or familyowned—Unanue’s Goya pedigree helps. His business education began in seventh grade, sweeping floors and loading trucks. He later served as Goya’s COO from 1999 to 2004, fully immersed in the day-to-day dynamics. There were job perks too, such as meeting Grammy Awardwinner José Feliciano. “He always liked to sing Goya jingles every time I’d see him,” says Unanue—usually 1960s jingles that gained popularity before Unanue, now 47, was born.

Jingle-singing celebrities aside, the real-life perspective brings a competitive advantage to AUA. “A lot of Hispanicowned businesses—and a lot of family-run businesses—are very insular and not open to outsiders,” Unanue says. “We can get into places where others aren’t able to because of our background and our history.”

“MORE AND MORE, IT’S DIFFICULT TO MAKE MONEY BY BEING FINANCIALLY CREATIVE. YOU NEED TO HAVE OPERATIONAL EXPERTISE TO MAKE COMPANIES BETTER.” David Benyaminy Partner, AUA Private Equity Partners

‘LISTEN AND LEARN’ // AUA looks at the stories behind the numbers of its portfolio companies.

To build trust, AUA emphasizes partnership and an appreciation for business-transition challenges. That’s why the firm added two familybusiness advisers to its operating executive board. They serve as a sounding board not only for AUA’s portfolio companies, but also for possible targets that may develop into deals down the road.

The firm’s partnership-first philosophy also informs operational improvements. Before making strategic changes at a company, AUA does two things: listen and learn. Flyer points out that some private equity owners might immediately switch a portfolio company to suppliers that seem less expensive without understanding the benefits accrued from decades-long loyalty with current relationships. “A lot of times, guys just look at the numbers,” he says. “But behind that is a story, a reason why the relationship serves you best.”

Sometimes both of AUA’s preferred demographic patterns intersect at one company, like Associated, a deal the firm closed on in December 2012.

The two co-CEOs, aged 72 and 81 at the time, had run the business for 40 years. The company serviced about 250 independent grocery stores in the New York area, many of them Hispanic-owned and catering primarily to Hispanic customers.

“It had brand equity that we felt was valuable. And it was a high free cash flow business, which is something that we like,” Benyaminy says.

Associated also had a differentiated business model—as a wholesale distributor to the stores that also provides financing to them. “We felt that despite the fact that it had been a pretty sizable company and very successful, it really could benefit from some proactive changes, not only by building out the management team but really adapting to the changing landscape within the New York marketplace,” he says.

Fine-tuning included building better relationships with store owners.

Zulema Wiscovitch, Associated’s executive vice president and chief administrative officer, oversees a street team that visits stores twice a month to review sales and ask about business needs. Associated also created a customer service center for stores. When delivery problems arise, the stores no longer have to track down the wholesaler. Instead, Associated resolves it. “We want to give stores the tools to be profitable,” Wiscovitch says.

Associated has also increased its staff—to about 25 employees from 14—and its stores, to 350 from 250. Profitability has risen every year, and AUA projects a 30 percent increase in 2015, compared with when the deal closed in 2012.

DISCOVERING VALUE

Photo courtesy of Blue Star Media

FAMILY FUN // Blue Star Media’s shows have resonated with Latino customers.

The firm also has a keen interest in mainstream businesses with untapped Hispanic market potential such as Blue Star Media, a deal that closed in June 2014. Blue Star is a family entertainment company with a production called Discover the Dinosaurs that tours about 140 convention centers nationwide each year. Discover features animatronic dinosaurs alongside a retail souvenir section and a children’s activity area.

After digging into Blue Star’s data, AUA learned the company did well with Hispanic customers, who tend to come with extended family. On average, visitors purchase three or four tickets; meanwhile Hispanic customers often buy eight to 12 tickets.

AUA didn’t view Blue Star as a “dinosaur” business— instead, it saw a platform for growth in the family entertainment segment. The company had developed strong relationships with convention centers during the past 25 years, and with 18 semi-trucks on the road each weekend, Blue Star was also adept at logistics.

To attract more Hispanic customers, Blue Star plans simple moves that include building a Spanish-language website and creating bilingual show signage. Peter Englehart, the company’s executive producer and a board member, says Blue Star will also expand the number of shows offered. A new show could launch by August.

In the next two years, AUA hopes to close about five deals, with the goal of doubling or tripling revenue during the period. More than half of those upcoming deals will likely be in the consumer space, says Unanue— focusing on Hispanic-branded products, in addition to health and wellness.

As the firm pursues those investment opportunities, it will continue to rely on its deep appreciation of two complex cultures: the diverse Hispanic population and family-run businesses. Both require a significant investment of time, as well as dollars. That means creating a true partnership by developing a customized approach and listening for what each business needs, instead of guessing or assuming, Flyer says. “A lot of times, people don’t stop and listen and learn, they just want to jump in.

And I think we are a little more patient.” // Sandra Swanson is a freelance writer based in the Chicago area.

“A LOT OF TIMES, GUYS JUST LOOK AT THE NUMBERS. BUT BEHIND THAT IS A STORY, A REASON WHY THE RELATIONSHIP SERVES YOU BEST.” Steven Flyer Partner, AUA Private Equity Partners

Helping businesses thrive in a highly regulated economy

Success in the marketplace requires a team that guides you and provides solutions to complex business challenges. That is what we do for a wide range of organizations, from entrepreneurs and emerging growth companies to leading national and international corporations. We are particularly active representing private equity funds, including formation of the funds, transactions on behalf of the funds and acting on behalf of portfolio companies. Our corporate lawyers work side-by-side with attorneys with deep financial, tax and regulatory experience to execute deals in the manner that best serves our clients’ strategic objectives.

Charles J. Morton, Jr. 202.344.4895 cjmorton@Venable.com Scott E. Gluck 202.344.4426 sgluck@Venable.com W. Bryan Rakes 410.528.2303 wbrakes@Venable.com Ronn S. Davids 310.229.9970 rdavids@Venable.com Frank M. Gasparo 202.344.4426 fmgasparo@Venable.com

Where the middle market turns www.Venable.com

ESOPs Represent Untapped Buyers for PE-Owned Companies and Make Ideal Partners For PE-Driven Buyouts

ESOPs

The Lesser-Known Private Equity Exit

BY MARY JOSEPHS

T

he three traditional exit ramps for private equity investments—corporate strategic buyers, initial public offerings and so-called secondary buyouts in which one private equity group sells to another—are all operating at optimal levels, aided by record highs of the U.S. stock market and consistently friendly credit markets.

And yet the number of U.S. companies owned by private equity firms is expected to continue growing, up from a 2014 midyear count of 7,675, according to PitchBook. With continued vitality in the economy and markets, exit activity in 2015 is expected to increase. Still, globally the inventory of PE-backed companies exceeds 13,000, roughly triple the level of a decade earlier. Private equity firms entered the financial crisis laden with cash and commitments from limited partners, so they kept buying companies; then unfriendly markets constricted exits for years. That led to longer hold times and, consequently, lower returns.

This inventory glut of PE-backed companies is reason enough to consider a fourth exit strategy, namely the Employee Stock Ownership Plan, or ESOP. ESOPs can and do buy companies owned by private equity funds, bidding competitively and closing with certainty.

Below is one inspiring case study. But there’s another reason to embrace employee ownership: As co-investors with PE funds at the front end of a buyout, ESOPs bring significant tax and operating benefits unavailable to other ownership structures. A small but growing number of players in the private equity world recognize these benefits and are aligning with ESOPs to become more effective bidders, owners and sellers of companies. Here’s why: • An owner of a C corporation selling to an ESOP can defer capital gains tax by reinvesting the proceeds in qualifying securities, such as common stocks. That boosts the after-tax return for the seller, making the ESOP’s (or combined ESOP and private equity) bid more attractive.

• If the company is an S corporation after a buyout by an ESOP (conversions can and do occur), as a pass-through vehicle it pays no federal or most state income tax. Those taxes are levied on the owners—the employees—when they retire or otherwise withdraw their holdings from the ESOP. In mixed ESOP-and-PE or ESOP-and-founder ownership instances, the tax benefits are typically proportionate to the employee ownership. This allows faster pay-down of debt and investments in growth and efficiencies.

• Numerous studies have shown that employee-owned companies are more productive: A self-policing ethic reduces waste, and workers are conscious of their ownership and behave with increased accountability.

Meanwhile, there is less friction between managers and ground-level workers. This adds to profitability and value over time and can become a crucial competitive advantage, especially in an era when more PE-funded buyouts are aimed at operational improvements, as opposed to cost-cutting and balance sheet restructuring.

ATLANTIC PLYWOOD: A REAL-WORLD SCENARIO The PE-ESOP equation is still playing out at Atlantic Plywood, a 40-year-old supplier of high-quality wood products, hardware and other components to the custom furniture and interiors industries. Based in Woburn, Massachusetts, the company has annual sales of roughly $120 million and employs about 190. It was successfully purchased in 1999 and operated by a private equity firm, Long Point Capital.

Atlantic Plywood’s founders stepped aside and Paul Vella, a long-time company executive, became CEO. Vella credits the Long Point Capital team, which has large-company experience, with helping instill in Atlantic Plywood financial and operating discipline that helped it prosper, even during recessions. Post-buyout, “We were a much better-run company,” Vella told me.

Long Point and one of its managing directors, Ira Starr, meanwhile, had some ESOP experience, having sold one portfolio company to its employees. Starr says he found the operating and tax advantages of an ESOP “exceptionally compelling,” and when the time came in 2007 to consider a sale of Atlantic Plywood, he asked Vella to look into an ESOP. Vella wasn’t previously ESOP-conversant, but once he studied the operating advantages and tax considerations, he began enthusiastically putting together a bid, retaining a bank experienced in employee ownership.

Long Point took back some paper (since paid off) to complete the deal, which was a big win for the firm.

The ESOP transaction was completed in 2008, and the economy almost immediately hit the skids. It was déjà vu for the management team. “Long Point bought at the top of the market in 1999,” Vella says. “They literally paid full price. We carried a lot of debt for a long time, so my CFO and I learned how to mind cash flow. We were not concerned about taking on debt for the ESOP.” During the most recent downturn, “Atlantic went out to sell into new channels,” says Greg Pray, a vice president at one of Atlantic’s major suppliers, Columbia Forest Products. “They didn’t bury their heads in the sand.”

Indeed, Vella says, market share increased during that period despite an 18 percent decline in sales. Meanwhile, competitors’ sales fell a more drastic 40 percent.

Long Point’s return accelerated as debt was repaid on the original buyout. So, too, has the ESOP’s performance improved at Atlantic Plywood. Shares valued at 25 cents in 2008 are now appraised at $9.95. And employees making $35,000 a year were expecting their ESOP account to grow by $7,700 in 2014.

“Once we became an ESOP, it definitely changed the morale of the company,” Andrea Hallett, an outside sales representative at Atlantic Plywood, told me. Damaged goods shipped to customers declined notably as teamwork between sales and warehouse crews increased.

The ESOP “multiplied the success we were able to have once we came out the other side” of the downturn, says Jeff Engelbrecht, director of business operations at Atlantic Plywood. As the ESOP shares have increased in value, workers have embraced the notion that they have control of their retirement destiny. And they work accordingly, Engelbrecht says. The company achieved its goal of 6.5 annual inventory turns and met ambitious standards for ontime and high-quality deliveries, setting Atlantic Plywood apart from mere discounters in the industry.

If you’re a PE fund partner, you may be thinking, “Great for them, but how do I capture those benefits?” In fact, you can. Productivity gains and other benefits from employee ownership aren’t dependent on an ESOP owning 100 percent of the company, according to a University of Pennsylvania study. Partial employee ownership—alongside founders or private equity owners—also tends to bring forth positive worker behavior that boosts productivity and reduces waste.

In helping to structure more than 200 ESOPs, I’ve seen this for myself: Employees, provided with a meaningful if minority ownership stake, tend to behave like owners. And that improves the productivity and value of the business. // —Mary Josephs is the founder and CEO of Verit Advisors, a Chicagobased investment banking firm specializing in ESOPs. She led ESOP advisory groups at Bank of America, ABN AMRO LaSalle Corporate Finance and LaSalle National Bank.

“ESOPs CAN AND DO BUY COMPANIES OWNED BY PRIVATE EQUITY FUNDS, BIDDING COMPETITIVELY AND CLOSING WITH CERTAINTY.” Mary Josephs Founder and CEO, Verit Advisors

ESOPs: FACT, NOT FABLE // About 10,000 ESOPs are in place in the U.S., covering 10.3 million employees—10 percent of the private sector workforce.

Approximately 5,000 ESOP companies are majorityowned by the ESOP.

About 330 ESOPs— 3 percent—are in publicly traded companies.

While ESOPs are found in all industries, 22 percent are in the manufacturing sector.

The size of a company’s annual contribution to its ESOP is a key determinant of the program’s positive impact on employee owners’ attitudes toward their work.

An estimated 7,000 of the 10,000 companies with ESOPs have programs large enough to be a major factor in the corporation’s strategy and culture.

The growth of ESOP formation has been influenced by federal legislation. While the rapid increase in new ESOPs in the late 1980s subsided after Congress removed certain tax incentives in 1989, the overall number has remained steady with new plans replacing terminated ESOPs.

Source: ESOP Association (www.esopassociation.org)

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .ÂŽ ACG

Global

network,

Partners

providing

help

valuable

expand

your

connections

middle-market with

corporate

clients and a consistent source of deals for capital providers.

L E A R N M O R E A B O U T A C G PA R T N E R S H I P S , V I S I T A C G . O R G / PA R T N E R S H I P S Š 2015 Association for Corporate Growth. All Rights Reserved.

QUICK TAKES GLENN LLOPIS // Chairman, Glenn Llopis Group

Culture Is the New Currency for Growth

T

he share of the U.S. population made up of Hispanics, along with African Americans and Asian Pacific Islanders, surpassed one-third in 2010. Together, these groups are on track to reach 54 percent of the population by 2050—

making them the minority-majority. According to the Selig Center for Economic Growth, by 2019 multicultural purchasing power will represent 26.7 percent of the U.S. total at $4.2 trillion.

This cultural demographic shift represents the last true remaining

BIO // The son of Cuban immigrants, Glenn Llopis is chairman of the Glenn Llopis Group, a nationally recognized thought-leadership, human capital and businessstrategy consulting firm. He is the best-selling author of the book “Earning Serendipity” and a contributing writer to Harvard Business Review, Forbes and The Huffington Post.

growth opportunity for companies that authentically engage with their consumers and employees. For mid-cap companies, the opportunity to create sustainable demand rests with their ability to design a business model that supports cultural and behavioral nuances.

For example, Latinos are no longer just a subsegment of the economy or marketplace, but prominent players in all aspects of American life.

They are an underserved community because most businesses don’t understand how to serve them or how cultural values influence the ways Hispanics naturally think, act and are motivated to buy.

Operationally and strategically, mid-cap companies can start to close these opportunity gaps by identifying the in-culture intellectual capital that already exists among their employees, external partners and consumers/clients. Companies must move beyond simple language translations and compliance with diversity initiatives; instead, they should maximize the full potential of their employees and support the unique lifestyle needs of their consumers through cultural intelligence and authentic engagement.

Continued on next page

QUICK TAKES GLENN LLOPIS // Chairman, Glenn Llopis Group With this cultural shift, it’s becoming less important for business to define the individual and more about the individual defining business. Here’s what that means for business leaders: 1. B ecome more culturally intelligent. Cultural intelligence is critically important to designing the right business model.

“THIS CULTURAL DEMOGRAPHIC SHIFT REPRESENTS THE LAST TRUE REMAINING GROWTH OPPORTUNITY FOR COMPANIES THAT AUTHENTICALLY ENGAGE WITH THEIR CONSUMERS AND EMPLOYEES.” Glenn Llopis Chairman, Glenn Llopis Group

Don’t guess.

2. A lways be aware of how the cultural shift affects your business.

It’s not just about managing diversity, but understanding how underserved communities enable new marketplace opportunities, increased innovation, and unprecedented growth and profitability.

3. T alent and business development must become interdependent.

Creating and sustaining growth demands an in-culture approach to recruit top talent that reflects the new faces of the marketplace.

4. C reate a best-place-to-work environment. When workplace values are aligned with the diversity of cultures represented in the workforce, loyalty, retention, engagement and productivity increase.

Begin to manage the workplace as a cultural mosaic versus a disconnected melting pot of talent.

5. P romote authentic best practices, not inauthentic initiatives. Don’t define your diversity practices with numbers; instead, base them on shared values that continuously strengthen the workplace culture and empower individuals to support company goals.

6. B e a leader, not a follower of the demographic shift. Stop mimicking what others are doing in your industry. Operationalize the shift by understanding its real value as a competitive advantage and growth enabler for your business.

As midsize companies introduce new products, services and technologies—invested with their newfound understanding and application of in-culture intelligence and know-how—they will reap the rewards of opportunities that larger Fortune 1000 companies have been slow to act upon. //

A QUALIFIED OPINION SALIM ISMAIL // Executive Director, Singularity University

S

alim Ismail is a strategist, entrepreneur and authority on the impact of breakthrough technologies on business and society. He is the founding executive director of Singularity University and author of “Exponential Organizations,” which explores how companies must adapt to cultural change. Earlier, Ismail founded several tech startups and ran Yahoo’s internal new-product incubator. His last company was sold to Google in 2010.

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HOW DO DEMOGRAPHIC SHIFTS IMPACT COMPANIES’ INNOVATION STRATEGIES AND DISRUPTIVE IMPULSES?

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t is imperative today that companies take into account demographic shifts. Perhaps the biggest one is the increasing gap between generations. A thousand years ago, one generation’s members led exactly the same lives as their parents and the generations before that.

The lives we lead today are quite different from our parents, and the lives of our kids are much different from ours. So companies have to, by definition, create disruptive products and services. For example, in just a few years the demographic shift has upended the value model of the Internet. The first generation of Internet companies—AOL, Yahoo, Google—stored information.

The next generation, including LinkedIn and Facebook, shared it for users. But the latest generation of Internet users on Snapchat and similar apps wants to share the information itself. We think this type of sharing will happen in many other industries, and companies will have to respond.

Photo by Tom Salyer

A QUALIFIED OPINION SALIM ISMAIL // Executive Director, Singularity University

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alim Ismail is a strategist, entrepreneur and authority on the impact of breakthrough technologies on business and society. He is the founding executive director of Singularity University and author of “Exponential Organizations,” which explores how companies must adapt to cultural change. Earlier, Ismail founded several tech startups and ran Yahoo’s internal new-product incubator. His last company was sold to Google in 2010.

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HOW CAN COMPANIES BRIDGE GENERATIONAL GAPS TO FORM COHESIVE TEAMS?

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t’s increasingly important for companies to adapt old processes and control frameworks for younger workers, especially millennials. It’s not easy for older workers to collaborate and coexist with millennials: The experience, expectations and coworking habits of the two groups are quite different. Two key techniques we use to navigate these issues are: 1. Shadowing and reverse mentoring: Having younger workers shadow more experienced ones can give them a sense of the wisdom and thinking styles of the older generation.

And having a younger worker mentor an older one on the latest technologies provides a two-way learning pattern.

2. Autonomy: I talk about this a great deal in my book, “Exponential Organizations.” Our old control mechanisms involved departmental reports, vertical hierarchies and endless internal meetings. Today, the ability to leverage technologies like activity streams, social networks and file sharing enables teams to self-select activities and operate largely autonomously. Problems are addressed much more Photo by Tom Salyer quickly and the workforce is more empowered.

A QUALIFIED OPINION SALIM ISMAIL // Executive Director, Singularity University

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alim Ismail is a strategist, entrepreneur and authority on the impact of breakthrough technologies on business and society. He is the founding executive director of Singularity University and author of “Exponential Organizations,” which explores how companies must adapt to cultural change. Earlier, Ismail founded several tech startups and ran Yahoo’s internal new-product incubator. His last company was sold to Google in 2010.

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AS COMPANIES LEVERAGE TECHNOLOGY TO APPEAL TO MILLENNIALS, HOW CAN THEY ENSURE THEY DON’T LOSE CUSTOMERS FROM OLDER GENERATIONS?

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his is a tricky question, and one faced by many brands today. I think the answer includes launching multiple brands that appeal to different age groups. For example, having an AOL or Yahoo email address is anathema to anyone under 30 years old. Facebook has addressed this problem by buying Instagram and WhatsApp and keeping those brands targeted to millennials. But Procter & Gamble revamped the Old Spice brand to appeal exclusively to a younger generation and left the older generation behind. Going forward, trying to have a product or service appeal to the different interests of a widening generation gap will be increasingly difficult.

Photo by Tom Salyer

A QUALIFIED OPINION SALIM ISMAIL // Executive Director, Singularity University

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alim Ismail is a strategist, entrepreneur and authority on the impact of breakthrough technologies on business and society. He is the founding executive director of Singularity University and author of “Exponential Organizations,” which explores how companies must adapt to cultural change. Earlier, Ismail founded several tech startups and ran Yahoo’s internal new-product incubator. His last company was sold to Google in 2010.

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FROM YOUR PERSPECTIVE, WHICH NEW TECHNOLOGIES IN THE MARKET ARE MOST REVOLUTIONARY?

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n the immediate future, I predict that sensors, wearable technology and the “Internet of Things” will have an enormous impact. Each sensor provides a stream of data that, correlated with other data sets, provides new insights.

To leverage this, artificial intelligence techniques will come to the fore. A little further out, biotech and synthetic biology will also be extremely disruptive. Anything that we make artificially today could be grown in the future. After that, nanotech and molecular assembly will revolutionize everything—but those are a couple of decades away. What’s very difficult to predict are the specific applications and uses. If you consider that just 15 years ago we didn’t use search engines, mobile phones or social networks, how can we imagine what the next 15 years will look like? Here’s how I think about it: In the 1500s we had the Gutenberg moment when the printing press changed everything. Today, we’re in the midst of about 20 such Gutenberg moments, all happening at the same time.

Photo by Tom Salyer

A QUALIFIED OPINION SALIM ISMAIL // Executive Director, Singularity University

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alim Ismail is a strategist, entrepreneur and authority on the impact of breakthrough technologies on business and society. He is the founding executive director of Singularity University and author of “Exponential Organizations,” which explores how companies must adapt to cultural change. Earlier, Ismail founded several tech startups and ran Yahoo’s internal new-product incubator. His last company was sold to Google in 2010.

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HOW CAN INVESTORS MANAGE RISK AS THEY EVALUATE INVESTMENTS IN COMPANIES THAT ARE TURNING THE TRADITIONAL PLAYBOOK ON ITS HEAD?

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his is a $64,000 question! There are three perspectives that become clear when I think about it. First, as we turn our world into information, we’re seeing that most viable new businesses are information-based or -enabled, so that becomes a key filter to use with investment opportunities. For example, the Tesla Model S is more of a computer with wheels than it is a car.

The second is to adopt a portfolio approach with extensive diversity—the world is so chaotic that it’s hard to see where a clear winner might be. And finally, make numerous small bets rather than fewer big ones. The cost of starting a company has dropped about 100 times in the last two decades, so radical distribution of risk is a great way of winning overall. Dave McClure of 500 Startups is living proof that this technique works.

Photo by Tom Salyer

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE

BRITISH COLUMBIA

RICHMOND

TAP CITIES TO NAVIGATE TO ARTICLE

ACG RICHMOND

Engaging Millennials on the Job The mystery around millennials was unpacked at a recent ACG Richmond event, which addressed the generation’s priorities and engagement in the workplace.

Designed as a roundtable discussion, “Engaging the Millennial Generation” was led by Eric Martin, founder of the business incubator 80amps, and featured three University of Richmond students as millennial representatives.

Millennials, who have never known work without email or cell phones, will make up the majority of the workforce by 2020. With that in mind, the discussion addressed how to engage this generation by assigning meaningful work, considering employees’ autonomy, allowing for work-life balance and recognizing achievement.

Twenty-five attendees participated in the January event, the second in the chapter’s Corporate Roundtable series designed to enhance the value of ACG membership for corporate members.

ACG Richmond has received enthusiastic feedback on the session. The next Corporate Roundtable installment, “Social Media for Corporate America,” is scheduled for April 17. //

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE KICKOFF // Attendees network at the chapter’s inaugural Young ACG event.

ACG BRITISH COLUMBIA

Young ACG Dealmakers on the Rise in Vancouver Young ACG British Columbia in December hosted its Rising Industry Stars panel focused on young dealmakers. Attendees heard from industry professionals who have had success building their careers and advancing within their organizations.

The panelists each work within different industries and offered a diverse range of perspectives on acquisitions and other topics.

Brody Speers, for example, is director of finance at Teekay Corporation, a provider of oil and gas marine transportation services. He discussed his firm’s approach to acquisitions, including identifying synergies and integrating acquired companies. Meanwhile, MarieLiesse Marc, senior director of business development at Vantage Airport Group, and Lucas Scobie, director of finance and treasurer of Sunrise Poultry Processors Ltd., discussed their companies’ approaches to acquisitions and growth.

The Rising Industry Stars panel followed Young ACG British Columbia’s sold-out kickoff networking event in June, which demonstrated the overwhelming demand for a Young ACG mandate in Vancouver.

The Young ACG committee formed in early 2014 to oversee the group, which was designed to build a strong membership base of young dealmaking professionals and to host events with both educational and networking components. //

THE PORTFOLIO INSIGHT FROM THE EXPERTS

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

IN THIS ISSUE PE LAW

GLOBAL VIEWS

The SEC’s focus on fund fees and expenses is fundamental to GP-LP trust and to the regulator’s assessment of a PE firm’s culture.

By following several key directives, dealmakers can increase the likelihood of success during a cross-border transaction.

SOUND DECISIONS

MID-MARKET TRENDS

Sell-side due diligence is essential for maximizing value when selling a portfolio company.

Key findings from the National Center for the Middle Market reveal executive perspectives on recruitment and talent management.

COMING SOON Check out the Portfolio section of the May/June issue for more on the latest middle-market trends, written exclusively by our team of expert ACG Global featured firms. To learn more about contributing to this section, please contact Maggie Endres, (312) 957-4257 or mendres@acg.org.

These articles are brought to you by ACG Global’s featured firms.

THE PORTFOLIO PE LAW // Julia D. Corelli, Partner, Pepper Hamilton LLP

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Fund Expenses from the Dealmaker’s Perspective

P Attention to fund fees and expenses is important for both GP-LP relations and regulatory assessment.

erhaps it’s a natural outcome of a maturing and cyclical industry, or maybe the over-exuberant swing of the regulatory pendulum, but today’s private equity world is about as challenging as any. The combination of competition for deals, external pressure from investors, internal pressure for talent and succession, and the mentality of regulators all contribute to this onerous climate. While ongoing regulatory scrutiny may normalize in the coming years, the shift may merely mark a calcification of changes in the PE industry precipitated in 2010 by Dodd-Frank. One of those changes is the accountability and transparency now required for a fund’s fees and expenses.

Why do fund managers need to be con-

separate these situations from those where

cerned about the SEC’s current focus on

a regulator or investor simply questions

fund fees and expenses? Not because of the

an expense. That questioning, as well as

dollars, though those may be substantial,

your answer, may have a dramatic impact

but because it is fundamental to the trust

on your firm.

between the GP and LP and to the regulator’s assessment of your firm’s culture.

At fundraising time, the dealmaker needs to help the firm understand how the

Transparency means full disclosure,

deal process has changed, or may change.

either when requested or through regular

Will more expenses be incurred earlier in

reporting. It’s generally easy to achieve,

the process than before? Will auctions have

but the proverbial gray areas are what

more participants? Will the auction pro-

trip up people. PE managers should not

cess change? Will you need to spend more

take comfort in the fact that there are few

to gain exclusivity for a deal? When in-

SEC enforcement cases about fees and

terviewed by the SEC, the dealmaker may

expenses, or that only the most egregious

need to demonstrate an understanding of

cases are brought—the ones any person

the firm’s stance on expenses, including

with a modicum of common sense would

its interplay with indemnification protec-

have recognized as involving wrongdoing.

tions in fund documents. When sitting

It is a long and often expensive process to

face to face with investors, dealmakers

THE PORTFOLIO PE LAW // Julia D. Corelli, Partner, Pepper Hamilton LLP

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS need to understand investors’ focus on the

Understanding the effect of deal man-

cost of their investment and their view

agement on the fund generates investor

of the fairness of the PE firm’s stance on

trust and demonstrates a culture of com-

costs. The dealmaker can help an investor

pliance to regulators. //

understand the full economic picture of Julia D. Corelli

managing the fund—that no manager has

This is a modified version of an article

a crystal ball, that costs may go up in unex-

that first appeared in the November 2014

pected ways, and that the manager cannot

issue of pfm, which unveiled the results

shoulder all of it. The dealmaker is criti-

of the Pepper Hamilton, PEF Services

cal to striking the right balance between

and PEI benchmarking survey on fees and

imposing costs on the fund and making the

expenses. Visit www.pepperlaw.com for the

management firm sustainable.

full survey results.

Little formal guidance is available from the SEC or industry experts about

Julia D. Corelli is a partner with Pepper

which kinds of expenses should be fund

Hamilton LLP’s Corporate and Securities

expenses, so fund managers inquire of

Practice Group and co-chairs its Funds Ser-

their friends and advisers: “What do you

vices Group. She concentrates in private

do about X?” or “How would you treat

investment fund formation, operations and

Y?” Answers vary immensely. While the

compliance, private equity and venture capital

industry is starting to deliver some bench-

investments, acquisitions, dispositions and

mark guidance, the dealmaker can help by

financings of business enterprises, joint ven-

understanding and influencing the firm’s

tures and intra-partner dealings.

position regarding fees and expenses to align closely with the deal process.

THE PORTFOLIO SOUND DECISIONS // Daniel Galante, National Managing Partner, Grant Thornton

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Sell-Side Diligence Can Boost Valuation

A

private equity firm will not buy a company without performing buy-side due diligence on the acquisition target, yet some sellers do not engage in due diligence when selling a portfolio company. This is a huge mistake.

Instead of viewing the process as an

Sell-side diligence makes for a smoother transaction and allows sellers to tell their stories.

while still maintaining the ability to con-

option, sellers should view a sell-side dili-

trol the messaging and enhance credibility,

gence report as an opportunity to show-

appropriating framing the conversation.

case the company and provide potential

Additionally, completed sell-side due dili-

buyers with the financial and operational

gence often leads to an expedited closing.

details to thoroughly evaluate the business

A thorough sell-side report will address

and make an informed offer. As buyers are

most buyers’ questions, typically reducing

now increasingly skeptical, a sell-side due

the depth of their own investigation.

diligence report enables sellers to gain

It’s important to note that an annual fi-

credibility, eliminate surprises, maintain

nancial audit does not replace the need for

control of the process, minimize disrup-

sell-side diligence, which focuses on value

tions and maximize value.

drivers and business considerations of

A consistent set of analyses for all par-

critical importance to potential buyers, not

ties will significantly reduce the burden on

just the company’s balance sheet. In effect,

the seller to respond to multiple document

it provides important color on the business

requests and redundant queries, especially

and its future prospects. //

when there is more than one potential buyer. Sell-side diligence can also help identify serious buyers and weed out those who are looking for ways to renegotiate the purchase price.

The process also levels the playing field, allowing all investors to bid using validated EBITDA, reducing the likelihood that the buyer will re-trade on price before the close. Sell-side diligence also minimizes surprises: It allows issues to be presented

Daniel Galante is Grant Thornton’s national managing partner of transaction advisory services. He has extensive experience serving as an adviser to companies in the United States and Europe in buy-side and sell-side transactions with private equity investors.

THE PORTFOLIO GLOBAL VIEWS // Richard Martin, Senior Director, Merrill DataSite

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Best Practices for Executing Effective Cross-Border Acquisitions

C

ross-border dealmaking made a huge comeback in 2014, as transactions totaling $1.3 trillion accounted for 37 percent of overall M&A volume, up 78 percent from 2013. In the U.S., firms boosted by the economic recovery have been most active in terms of international deals, and industry insiders predict the trend will continue well into 2015.

Successful cross-border transactions require a deep understanding of local legal, business and cultural characteristics.

Cross-border considerations can add

Be proactive on regulatory requirements.

layers of complexity to any M&A acquisi-

Regulatory considerations are taking on

tion strategy. It is essential that investors

greater importance in today’s M&A en-

prepare for success by assembling a deal

vironment. Corporate investors now pay

team of experienced advisers with in-depth

much closer attention to compliance re-

understanding of the target country’s deal

quirements related to the Foreign Corrupt

environment. Dealmakers are encouraged

Practices Act, or FCPA, and the U.K. Brib-

to follow several key directives.

ery Act. Given the broad scope and high costs associated with FCPA and Bribery

Understand the market context.

Act investigations, investors are advised to

One recommendation made by experienced

commit to thorough due diligence to miti-

cross-border dealmakers is to avoid think-

gate risk. Those new to the process should

ing in terms of geography when identifying

engage the appropriate advisers to ensure

targets—generalizing in terms of “region-

diligence is properly managed.

al” concepts will not yield the best conclusions. Experienced dealmakers analyze

Be prepared for deeper due diligence.

each opportunity in terms of the govern-

Due diligence becomes more complex

mental, legal, business and cultural char-

when conducted across borders for many

acteristics that define the country of its

reasons. Levels of transparency in finan-

locale. Critical knowledge can range from

cial and legal reporting often differ; mean-

well-defined topics such as legal require-

while, business practices deviate, resulting

ments to so-called soft issues like human

in different expectations between buyer

resource concerns.

and seller over disclosure. Information access may be more difficult—or the infor-

THE PORTFOLIO GLOBAL VIEWS // Richard Martin, Senior Director, Merrill DataSite

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Richard Martin

mation may simply not be available. New-

handpicked local staff lets the buyer begin

comers to cross-border investing are wise

shifting the mindset of the management

to plan for higher costs related to involving

team in the direction that will be taken

their own people and hiring local advisers.

post-acquisition.

Use a virtual data room.

Understand the culture.

Regardless of company size or the scope

Most M&A professionals believe much of

of a pending transaction, it pays to begin

the tactical aspects of cross-border deal-

preparation early in the pre-transaction

making can be learned and refined. Many

period, taking advantage of virtual data

believe that how a company manages

room technology. A smooth, well-planned

relationships will greatly affect a deal’s

due diligence process with a highly struc-

long-term success. Ultimately, partner-

tured indexing methodology and the right

ships succeed or fail on the strength of

VDR technology is much more likely to en-

human relationships; the most experi-

sure the required disclosures are made to

enced dealmakers are constantly mindful

the right parties and that the transaction

of the impact an understanding—or lack

is optimally managed and controlled.

thereof—of cultural nuances can have on a transaction’s ultimate success. The best

Invest in a local presence.

cross-border dealmakers regard cultural

One of the most important factors in cross-

sensitivity and integration as high priori-

border M&A success is choosing the right

ties, while many credit strong listening

partner. No partnership should be con-

and observational skills with their suc-

sidered without a thorough background

cess. Indeed, culture is a theme that per-

check of the company, its owners and

meates every aspect of the process, from

senior management to eliminate financial

identifying potential acquisitions to ap-

and legal risks. It’s critical to vet potential

proaching sellers, negotiating deals and

partners to verify they can truly make

integrating the new company. //

things happen in the local market. Leading dealmakers build their own operations on

Richard A. Martin, a senior director at Merrill

the ground staffed by nationals exposed to

Corporation, is responsible for Merrill Data-

Western education and business practices.

Site’s global marketing group, working closely

This approach allows the buyer to get in

with financial professionals to provide virtual

more quickly and address local proce-

data room solutions for their transaction and

dures that could delay the process. Adding

due diligence needs.

THE PORTFOLIO MID-MARKET TRENDS // Raymond Noe, Department of Management and Human Resources, The Ohio State University Fisher College of Business

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Sourcing & Recruiting in the Middle Market: PE vs. Non-PE-Owned Firms

Q

uarter after quarter, the ability to attract, train and retain talent tops the list of significant challenges facing middle-market leaders, according to the National Center for the Middle Market’s “Middle Market Indicator” report. Midsize companies, unlike their larger counterparts, often lack the name recognition to attract top talent.

New research shows differences in firms’ approaches to attracting and managing talent.

The NCMM’s latest research shows how

and quality of people and benefits of-

C-suite executives in this sector view their

fered. Executives at PE-owned firms

employment brand, how they attract, re-

were more likely than those at non-PE-

cruit and identify top talent both inside and

owned firms to say opportunities for

outside the firm, and the challenges they

promotion and advancement, incentives

face doing so. Here are some key findings:

and bonuses, and non-monetary perks

•• Less than a third of midsize company executives said they have a clear employment brand they are satisfied with

were attractive and compelling parts of their EVP.

•• When asked whether their company’s

and works for them. This holds true

values were documented, just over 50

regardless of whether or not the firm is

percent of executives said yes—this was

PE-owned.

significantly less for PE-owned firms.

•• Less than a quarter of middle-market

•• Significantly more PE-owned firms,

executives said they have a compelling

compared with their non-PE-owned coun-

employee value proposition, or EVP. For

terparts, use third parties to monitor the

PE-owned firms this number is slightly

workplace reputation of their companies.

higher, hovering just below a third, significantly higher than for non-PE owned firms.

•• LinkedIn tops the list of technology tools used to source external candidates. Other popular resources included

•• Executives reported the most attractive

CareerBuilder, Monster and Facebook.

and compelling parts of their EVP are

PE-owned firms used these tools signifi-

meaningful work, mission and purpose,

cantly more than non-PE-owned firms.

THE PORTFOLIO MID-MARKET TRENDS // Raymond Noe, Department of Management and Human Resources, The Ohio State University Fisher College of Business

PE LAW

SOUND DECISIONS

GLOBAL VIEWS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Raymond Noe

•• Overall, firm representatives did not

•• Despite the importance of talent iden-

agree on the reason top talent turned

tification and development, one in five

down employment offers. Slightly more

firms reported ineffectiveness freeing

than 20 percent reported they lost job

up resources such as time and money for

candidates for reasons outside of their

talent development.

control, such as counteroffers from a current employer or personal issues preventing offer acceptance. However, preventable reasons included slow hiring and recruiting, inability to agree on terms of an offer, and lack of a compelling EVP. More than one-third of PE-owned firms endorsed these reasons, which was greater than all firms and non-PE owned firms.

•• When developing top talent and staffing key leadership positions, more than 60 percent of respondents said the senior

•• The three top-ranked qualities firms use to evaluate external candidates for key leadership positions include fit with company values and culture; fit with the work group; and leadership skills such as strategic thinking, inspiring others and influencing.

•• Where are firms sourcing top talent?

Over the past three years, firms have relied slightly more on internal (57 percent) rather than external sources (43 percent). //

leadership team can recognize and

Raymond Noe is a faculty member in the

identify employees with high potential.

Department of Management and Human

Slightly more than half reported effec-

Resources at The Ohio State University Fisher

tive use of development activities, such

College of Business.

as mentoring or training, to accelerate talent development and said senior leadership was actively involved in succession planning and developing and staffing key leadership positions. PE-owned firms reported more effectiveness preparing high-quality development plans for employees and leaders with high potential and sharing information about top talent than non-PE-owned firms.

The National Center for the Middle Market is a collaboration between GE Capital and The Ohio State University Fisher College of Business. For more details or to download a copy of the “Middle Market Indicator” report, visit www.middlemarketcenter.org/researchreports.

P A R T N E R S I N D R I V I N G M I D D L E - M A R K E T G R O W T H .ÂŽ From

consultants

to

C PA s

and

a

host

of

other

financial

specialists, ACG Global Partners guide the success of more than 30,000 professionals in the middle market worldwide.

L E A R N M O R E A B O U T A C G PA R T N E R S H I P S , V I S I T A C G . O R G / PA R T N E R S H I P S Š 2015 Association for Corporate Growth. All Rights Reserved.

THE LADDER ACG MEMBERS ON THE MOVE

Toby Mitchenall

Toby Mitchenall, a member

Capitala Finance Corp., a

of ACG UK, has joined JPES

business development company

Partners, a London-based

managed by Charlotte-based

marketing and communications

Capitala Investment Advisors,

consultancy serving the asset

announced a $20 million

management sector. As a

investment in Tender Greens

client director, Mitchenall is

Holdings, a grower, packer and

responsible for overseeing

shipper of salad greens

day-to-day client activities.

to North America and the United Kingdom.

Stewart Licudi, a member of

Stewart Licudi

ACG UK, was invited to become

Victory Park Capital, a middle-

a partner of the investment bank

market asset management

William Blair, which he joined

firm headquartered in Chicago,

in 2006. He currently serves

provided a $200 million credit

as managing director, head of

facility to the Kreditech Group,

European financial sponsors.

a German consumer finance technology company.

Isabel Fernandez, a member

Isabel Fernandez

of both ACG Connecticut and

CohnReznick, an accounting,

ACG Global’s strategic planning

tax and advisory firm, in

committee, was promoted to

February acquired NOI

chief commercial officer of GE

Strategies, a global real estate

Capital. Most recently Fernandez

consulting firm, to augment

served as chief commercial

client services within the

officer for GE Capital, Americas,

commercial real estate industry.

a business within GE Capital.

Michael M. Grebe was NCK Capital, a Dallas-based

appointed executive vice

private equity firm, has acquired

president and general counsel

Ogle School, an operator of

of HUSCO International, a

accredited cosmetology and

Wisconsin-based minority-

esthetics education institutions across Texas.

Michael M. Grebe

owned designer and manufacturer of hydraulic and electro-hydraulic components.

To submit your promotions, job changes and other accomplishments, please send details and a high-resolution color photo to Associate Editor Kathryn Mulligan at kmulligan@acg.org.

B-SIDE VENITA FIELDS // Senior Managing Director, Smith Whiley & Co.

BEST PART OF THE JOB...

“When you get a chance to meet the management team or the owners behind the numbers, that’s the most rewarding part of the entire process for me. Spreadsheets don’t pay lenders back, people do.”

VENITA FIELDS // After spending 19 years in commercial banking, in 1998 Fields opened the Evanston, Illinois, office of Smith Whiley & Co., a women- and minority-owned investment firm where she sources and oversees mezzanine and equity investments.

“ASKING FOR MONEY AND HAVING TO FIND CAPITAL IS DIFFICULT FOR MANY ENTREPRENEURS, REGARDLESS OF GENDER OR COLOR.” LEAVING BANKING FOR PRIVATE EQUITY...

“I was ready to be more of an entrepreneur than a traditional corporate person.”

CHANGING FACE OF FINANCE...

“When I walk into a room, I wish there were more women in the room, more people of color, but at the same time I know there are more than there used to be. I see progress and I see acceptance.”

Content sponsored by

—KMM

BUSINESS ROLE MODEL... “(Retired President of AM International) Jerry O. Williams. I met him when I was a youngster in banking, and he was just so gracious. To be honest, I would not have conceived that an African American could be the CEO of a publicly traded company.”

“THAT’S THE BEAUTY OF THIS BUSINESS—YOU REALLY MEET SOME GREAT PEOPLE.”

BOARDROOM DIVERSITY...

“It’s like talking to a congregation.

You assume that everybody is singing from the same song sheet, but when new members come in, they may have a different voice to add, and you need that fresh perspective.”

UNFORESEEN PATH...

“I majored in history. I have a liberal arts background, and I thought I was going to law school. To be brutally honest, no, not ever did I contemplate doing what I’m doing now.”

2015 CONFERENCE

INS S MEET LEADING R TIT O T UTIO NAL ENERGY INVES

PR D E IVA TE C RM O F S APITA N NO A R T L E A N D TH TY I RT H N A M E R I C A N O P P O RT U

DE

Presented by

CE

MB

ER 1 0

AN I N O T

, 2 0 1 5 | THE HOUS HOUSTON, TEXAS

H

E OT

L

MORE INFORMATION www.energygamechange.com

IT’S THE SMALL THINGS DEMOGRAPHIC TRENDS // Birds of a Feather...

1

LOWERING THE BOOM 50,000 middle-market firms report that the retirement of baby boomers will influence their companies in some way.

THE ABCs OF LGBT CONSUMERISM In 2012, total buying power of adult LGBT individuals was $790 billion. Seventy-one percent of lesbian and gay people reported brand loyalty to those supportive of LGBT issues, even if a brand is more costly or less convenient.

3

TRANSLATING POPULATION SURGE INTO GROWTH The Hispanic population grew to 53 million in 2012, a 50% increase since 2000 and nearly six times that of 1970, accounting for more than half of the country’s 2000-2012 growth.

4

PARKING CAPITAL IN MOBILE HOMES As of 2012, about 6% of Americans lived in mobile homes. PE funds are starting to ride the demographic trend by investing in trailer parks, with Warren Buffet, Sam Zell and the Carlyle Group leading the charge.

5

WORKING ON MY FITNESS The $44.6 billion U.S. fitness sector is highly fragmented and growing, experiencing expansion in club memberships and a vibrant at-home market, with changing demographics a major factor.

6

FINDING YOUR NICHE A growing number of private equity funds follow niche strategies—think Hispanicfocused brands—as a means of generating double-digit annual returns from the activist, long-term investment approach that best defines private equity.

2

—Larry Guthrie, manager, communications and marketing, ACG Global

16 – 17 NOVEMBER 2015 | MÖVENPICK HOTEL AMSTERDAM CITY CENTRE | AMSTERDAM

JOIN ACG THIS YEAR IN AMSTERDAM

S A V E T H E D AT E . S TAY U P D AT E D .

W W W. E U R O G R O W T H . O R G

#EUROGROWTH © 2015 Association for Corporate Growth. All Rights Reserved.

THE LEADERSHIP ACG DIRECTORS ACG BOARD OF DIRECTORS //

CHAPTER REPRESENTATIVE DIRECTORS //

DIRECTORS AT LARGE //

Chairman Doug Tatum* Newport Board Group ACG Atlanta Term expires 8/31/2015

Brent Baxter Clayton Capital Partners ACG St. Louis Term expires 8/31/2017

Jason Brown Victory Park Capital ACG Los Angeles Term expires 8/31/2016

Bradford Adams TM Capital ACG Boston Term expires 8/31/2015

Jason Byrd The Charter Group ACG Western Michigan Term expires 8/31/2017

Robert Brighton Shutts & Bowen, LLP ACG South Florida Term expires 8/31/2017

Greg Cinnamon Kilpatrick Townsend & Stockton LLP ACG Atlanta Term expires 8/31/2015

Roy Graham Corporate Finance Associates ACG Central Texas Term expires 8/31/2015

Mike Ehlert Capital One Leverage Finance Corp.

ACG Dallas/Fort Worth Term expires 8/31/2015

Karen Grexa KeyBank Business Capital ACG New Jersey Term expires 8/31/2017

Brian Gilbreath Merrill Corporation ACG Nebraska Term expires 8/31/2015

Jay Hansen O2 Investment Partners ACG Detroit Term expires 8/31/2017

Ramsey Goodrich Carter Morse & Mathias ACG Connecticut Term expires 8/31/2016

Patricia King Bank of America Merrill Lynch ACG Tennessee Term expires 8/31/2015

Don Lipari McGladrey ACG New York Term expires 8/31/2017

Robert Napoli First West Capital ACG British Columbia Term expires 8/31/2015

Angie MacPhee RGL Forensics ACG Denver Term expires 8/31/2016

Walter O’Haire Valuation Research Corp.

ACG San Francisco Term expires 8/31/2017

Gretchen Perkins Huron Capital Partners ACG Detroit Term expires 8/31/2016

Steve Peterson Brass Ring Capital, Inc. ACG Wisconsin Term expires 8/31/2015

Karen Tuleta Morgenthaler ACG Cleveland Term expires 8/31/2017

Hans-Josef Vogel Beiten Burkhardt ACG Germany Term expires 8/31/2015

Tom Washbush Bricker & Eckler LLP ACG Columbus Term expires 8/31/2015

Vice Chairman Richard Jaffe* Duane Morris LLP ACG Philadelphia Term expires 8/31/2015 Chairman of Finance Stephen Prostor* Citi Private Bank ACG New York Term expires 8/31/2015 Secretary J.B. Dollison* Crutchfield Capital Corporation ACG Houston Term expires 8/31/2015 Immediate Past Chairman Pamela Hendrickson* The Riverside Company ACG New York Term expires 8/31/2015 President & Chief Executive Officer Gary A. LaBranche, FASAE, CAE* ACG Global

ACG HONORARY DIRECTORS // Robert G. Coffey Alan B. Gelband *denotes member of Executive Committee

ACG NEAR YOU ACG CHAPTERS ACG 101 Corridor acg.org/101

ACG Detroit acg.org/detroit

ACG Orlando acg.org/orlando

ACG Arizona acg.org/arizona

ACG Edmonton acg.org/edmonton

ACG Philadelphia acg.org/philadelphia

ACG Atlanta acg.org/atlanta

ACG France acg.org/paris

ACG Pittsburgh acg.org/pittsburgh

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ACG Portland acg.org/portland

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ACG San Francisco acg.org/sanfrancisco

ACG Calgary acg.org/calgary

ACG Kentucky acg.org/kentucky

ACG Seattle acg.org/seattle

ACG Central Texas acg.org/centraltexas

ACG Los Angeles acgla.org

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ACG Charlotte acg.org/charlotte

ACG Louisiana acg.org/louisiana

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ACG Chicago acgchicago.com

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ACG China acg.org/china

ACG Minnesota acg.org/minnesota

ACG Tampa Bay acg.org/tampabay

ACG Cincinnati acg.org/cincinnati

ACG National Capital acgcapital.org

ACG Tennessee acg.org/tennessee

ACG Cleveland acg.org/cleveland

ACG Nebraska acg.org/nebraska

ACG Toronto acg.org/toronto

ACG Columbus acg.org/columbus

ACG New Jersey acg.org/newjersey

ACG UK acg.org/uk

ACG Connecticut acg.org/connecticut

ACG New York acg.org/nyc

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ACG Dallas/Fort Worth acg.org/dfw

ACG North Florida acg.org/northflorida

ACG Western Michigan acg.org/wmich

ACG Denver acg.org/denver

ACG Orange County acg.org/occ

ACG Wisconsin acg.org/wisconsin

THERE IS A DEAL IN YOUR FUTURE.

M A Y 2 – 4 , 2 0 1 6 | H Y AT T R E G E N C Y | N E W O R L E A N S , L A

W W W. I N T E R G R O W T H . O R G © 2015 Association for Corporate Growth. All Rights Reserved.