Middle Market Growth - March 2015

Growth MIDDLE MARKET

// MARCH 2015

J.B. PRITZKER & DAVID LEE

DEVELOPING A REFINED

PALLET

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EXECUTIVE SUMMARY DOUG TATUM // Chairman, ACG Global Board and Newport Board Group

InterGrowth Is Right Around the Corner

T

he March issue of Middle Market Growth is focused broadly on the theme of logistics and transportation—taking a look at some of the players and trends in the industries that move

products, services and people where they need to go in good shape and a timely fashion.

Speaking of getting people where they need to go, now is a great time for me to remind readers of ACG’s 44th annual InterGrowth® conference scheduled in Orlando from April 13-15.

This high-profile event, whose attendees consistently account for one-third of total U.S. private equity deals—offers three tightly packed days of logistical excellence. There are unmatched networking opportunities, executive roundtables, panel discussions, informative breakouts and public policy sessions—the contacts and information you need to move ahead in today’s dealmaking arena with confidence.

Don’t miss keynote addresses from technology futurist Salim Ismail, and golf legend and Great White Shark Enterprises CEO Greg Norman interviewed by CBS Sports anchor Greg Gumbel. Besides programming, there will be ample time to network on the golf course, tennis court or at the great leisure and dining venues in the Orlando area.

If you have time to shop for consumer goods while in the Sunshine State, you may find our cover story on PECO Pallet particularly interesting. PECO is a midsize logistics company whose recyclable wooden pallets largely function behind the scenes, ensuring that products from well-known manufacturers like Kraft Foods make their way to the shelves of Costco and other major retail chains in the most efficient and cost-effective manner.

Chicago’s Pritzker Group Private Capital recognized the inherent value of this unsung supply chain hero, taking a majority position in PECO in 2011. Its capital infusion has allowed the company to broaden its geographic footprint and gain market share, expanding beyond the U.S. to Mexico and Canada.

A Qualified Opinion with David Mitchell, managing director of private equity firm Transportation Resource Partners, offers an insightful take on his experience investing in the transportation space.

With portfolio companies ranging from a major dealer of used Freightliner trucks to a provider of onsite refueling services, Mitchell provides in-depth knowledge of an industry rife with opportunities.

There is plenty more great content, including a feature story on the growing use of independent sponsors to source deals. So take a read, and I’ll catch up with you next month in Florida. //

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

Hold That Drone!

A

mazon’s launch a year ago of its Prime Air service seemed like something out of a William Gibson sci-fi novel. Shipping to consumers via aircraft drones? So we were startled to discover

the identity of the company’s recent partner to speed delivery this past Christmas: the U.S. Postal Service!

Turns out the paradigm of 21st century e-commerce sought out the symbol of mail’s bygone era to help with Sunday shipping. Amazon also added seven additional sorting centers from which pre-boxed and labeled packages could be sent by truck to regional post offices.

Little did we suspect, when placing our last-minute pre-holiday

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.

Content sponsored by

Amazon order for hot pink ice skates for our 5-year-old daughter, who else was in the loop. In fact, it was the first time in its 240-year history that the post office was open for business on Sunday.

New and old players teaming up is just one twist in today’s logistics environment. Moving boxes from point A to point B no longer happens in a straight line. Thanks to multiplex shopping options, manufacturers must follow customers wherever they order products—via stores, or online using tablets and phones.

That’s given rise to a new buzz phrase: “Omni-channel distribution.”

According to logistics expert Ed Tuso, to stay competitive vendors must be capable of pushing products through multiple distribution channels with multiple retailers, both to distributors and consumers.

“It’s all about better visibility and having product in the right places,” Tuso says. “When dealing with multiple parties, data must be usable and accessible.” For that to happen, cloud technology plays a key role, particularly in the areas of product and inventory supply management.

At the same time, in this slow-growth economy companies look to improve margins by scouring their supply chains for savings. Reducing inventory and overproduction helps. Manufacturers, too, are asking, where are my plants? Where do I have to move my goods?

Continued on next page

MIDPOINTS RANDY SCHWIMMER // Founder and Publisher, The Lead Left NEW AND OLD PLAYERS TEAMING UP IS JUST ONE TWIST IN TODAY’S LOGISTICS ENVIRONMENT.

Retailers care less about empty warehouses than empty shelves. They drive demand by carrying what sells. The number of SKUs drives whether a retailer cares about controlling distribution.

Innovation has come to trucking and transportation. Shipping product to supermarkets with different refrigeration requirements in one multitemperature truck is a big competitive advantage. Vendors and distributors must figure out what they do well in order to position themselves with retailers looking for an edge.

Back to hot pink ice skates. Ed Tuso reports that the percentage of items bought through Amazon, but not shipped by it, is going up. Yes, they’ll sell you anything, but let third parties do the heavy lifting. Just as long as it comes in an Amazon box.

The prospect of Amazon drones clogging air traffic sent the FAA into a tailspin. But the future of moving boxes may be less about disruptive innovation than fresh uses for legacy businesses.

Think about P.O. boxes. By one estimate there are 21 million in the U.S. And they’re all owned by the Postal Service. Maybe you can teach old boxes new tricks. //

Growth MIDDLE MARKET

// MARCH 2015

Photo by Matthew Gilson

FEATURES

Developing a Refined Pallet

Backed by Pritzker Group Private Capital, PECO Pallet has carved a niche for itself in the behind-the-scenes product distribution market. A stalwart player in the space, PECO is leveraging strong management, customer service and technological advantages to win accounts like Kraft and expand its market share.

Read more.

“I NEVER THOUGHT ANYBODY COULD BE PASSIONATE ABOUT PALLETS.” // J.B. PRITZKER, MANAGING PARTNER, PRITZKER GROUP PRIVATE CAPITAL

Private Equity’s Secret Weapon PE groups are increasingly sourcing deals through independent sponsors, drawn to their niche expertise, connections and the low risk of paying postclosing.

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

Photo by Privcap Media

IN EVERY ISSUE Executive Summary Executive Suite MidPoints

by Randy Schwimmer Face-to-Face

DEPARTMENTS THE ROUND • TransTech Deal Signals Bridge Industries’ Commitment to Energy.

• Brand-Driven Approach Accelerates Post-Merger Integration.

• Changing the Game of Energy Investment.

Read more.

Quick Takes

A QUALIFIED OPINION

The Ladder

David Mitchell, Managing Director of Transportation Resource Partners, Talks About the Changes, Trends and Opportunities He Sees in the Transportation Sector.

B-Side It’s the Small Things The Leadership

ASSOCIATE EDITOR Kathryn Mulligan kmulligan@acg.org

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

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

DIRECTOR, STRATEGIC DEVELOPMENT Meredith Rollins mrollins@acg.org

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ACG@WORK

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AWARDS 2014 Association TRENDS All-Media Silver Award, Monthly Trade Publication 2014 Folio Eddie Digital Winner, Standalone Digital Magazine 2014 Apex Award, New Magazine, Journal & Tabloid

• Capital Summit Debuts Capital Markets Research.

• Congressional Leader Offers Insight on Economy at Connecticut Event.

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

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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.

WHO YOU NEED TO MEET.

APRIL 13 – 15, 2015 W A L D O R F A S T O R I A A N D H I LT O N B O N N E T C R E E K ORLANDO, FLORIDA Join nearly 2,000 dealmakers for three days of deal flow opportunities, powerful speakers and commentary from leading M&A experts. Attendees represent all areas of the middle market, including private equity executives, investment bankers, lenders, corporate strategic acquirers, limited partners and service advisers.

Combined with three efficient marketplaces and a wide variety of networking and thought leadership opportunities, InterGrowth 2015 is your go-to deal flow conference this and every year.

R E G I S T E R T O D AY AT W W W. I N T E R G R O W T H . O R G . Š 2015 Association for Corporate Growth. All Rights Reserved.

FACE-TO-FACE CONNECT TO YOUR NEXT DEAL

For complete details, including a detailed schedule and registration information, visit InterGrowth.org.

SAVE THE DATE

Global Networking Nirvana ® at InterGrowth 2015 Next month, nearly 2,000 middle-market professionals from across the globe will gather in Orlando for 72 hours of highly effective networking and deal flow. Join the InterGrowth community at the Waldorf Astoria and Hilton Bonnet Creek on April 13-15 for three of the most productive days you will spend in 2015—connecting with the people you need to create quality dealmaking opportunities for you and your firm.

Capital. Connections. Deals. That’s the InterGrowth promise. ACG delivers with three dynamic marketplaces providing endless networking opportunities: the InterGrowth Lounge, the networking hub of the event; ACG DealSource®, your pipeline to investment banks; and ACG Capital Connection®, the perennial powerhouse event where attendees can connect with 100 capital providers. Hear dynamic speakers and educational panels featuring leading M&A experts, as well as keynote presentations: Salim Ismail, a futurist and technology strategist, and an interview with golf legend and entrepreneur Greg Norman by CBS Sports’ Greg Gumbel. InterGrowth 2015 is the essential event to grow your business this year. //

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 Portland’s Annual CXO Event at the Portland Golf Club Left: Angela Dowling, president, Regence BlueCross BlueShield of Oregon, spoke at the event.

Right: Michael Hurley of JPMorgan Chase at the podium with panelists (from left) Paul Trotter of Author-it Software Corporation; Angela Dowling; and John Konsin, formerly of RS Medical.

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Had a newsworthy chapter event?

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

THE ROUND NEWS THAT MATTERS

To learn more, read the March 2014 Middle Market Growth cover story profiling Bridge Industries.

TransTech Deal Signals Bridge Industries’ Commitment to Energy Bridge Industries is bullish on the development of infrastructure to transport natural gas liquids.

In October, the Cleveland-area holding company’s portfolio investment TransTech Energy purchased Tubular Structures International, a fabricator of pressure vessels, storage vessels and processing equipment for the oil and gas industry.

“Everywhere there is activity and (energy) infrastructure being built out, we’re supplying it,” says Bridge Industries President Jeffrey Berlin, adding: “We have had very significant activity in the energy sector since we were formed 12 years ago.”

The deal allows TransTech, which acquired the business through a subsidiary, to add significant operational capacity. Tubular Structures, which was previously a supplier to TransTech, operates a 100-acre, 200-square-foot plant in McGregor, Texas.

“We’re moving pretty quickly to add people and equipment and capacity,” Berlin says.

He adds that the deal is a nice complement to another Bridge Industries holding. The firm owns Millersburg, Ohio-based Multi Products Co., a regional producer of artificial lift systems, control systems and valves for the energy market. In addition to its two control investments, Bridge has minority stakes in other equipment manufacturers in the energy sector. // —DLC

THE ROUND NEWS THAT MATTERS

CASE STUDY

Brand-Driven Approach Accelerates Post-Merger Integration Bob Domenz, Chief Executive Officer, Avenue In Avenue’s decade-plus experience working with middle-market companies, we’ve found brand strategy to be a powerful lever for accelerating post-merger integration and realizing the full potential of a newly combined entity. This is one such story.

A private equity firm acquired two promising entities in the food container space—Tosca, a 58-year-old Wisconsin-based company, and the reusable plastic container (RPC) unit of Georgia Pacific. This combined entity—the new Tosca—had aspirations of becoming the dominant national player in the rapidly growing food container industry.

Tosca’s president, Eric Frank—formerly head of the GP business—faced many challenges common to leaders in post-merger situations, including: • Differing visions • Divergent cultures, values and beliefs • Different customers and markets • Differing brands and market messages • Confusion and apprehension among employees and customers Continued on next page

THE ROUND NEWS THAT MATTERS How could the two businesses be successfully joined into a single KEY TAKEAWAYS FROM THIS CASE STUDY INCLUDE THE FOLLOWING DIRECTIVES:

entity with a common vision and culture and a shared brand and

1. Develop a deep understanding of what matters most to customers and use this as the primary criteria for all decisions.

companies. We needed help knitting them together,” said Frank. “We knew

2. Speed alignment within the new organization by:

organization. They also needed a differentiated and compelling brand

• Involving representatives from all levels and functions in the organization during the process.

• Concurrently developing your internal strategies (mission, vision, values) and external strategies (brand, messaging, value proposition).

3. Identify a purpose that the new organization can rally behind to help erode legacy and territorial issues.

marketing message?

“It was a clash of cultures and visions between two very different we wanted to be more, but we didn’t quite know how to get there exactly.”

He and his leadership team needed to define a compelling vision and purpose and assign new values to align team members with their and market message to convey the strength of the merged entity.

The first step was to fully understand what Tosca needed. We learned that its customers wanted more than just a box vendor; they wanted a supply chain partner with experts who take the time to understand their business and collaborate with them to create a solution. Together these insights became the guidepost for all decisions going forward.

We began by leading various members of Tosca’s leadership and functional areas through a series of highly interactive planning workshops.

This approach allowed us to quickly identify areas of misalignment and differing viewpoints. We used various tools to facilitate discussions that ultimately enabled participants to envision their new future together.

The outcome: one company, one brand, one voice. Tosca is now an organization unified through its mission to “revolutionize the flow of perishables”; new values built on the most desirable attitudinal and

4. Over-communicate using directness and honesty.

behavioral traits of both legacy organizations; a clear and compelling

5. Develop a new—or refreshed—visual identity to serve as a powerful symbol of change to both internal and external audiences.

visually represents the movement of a supply chain.

new market message; and a highly differentiated new brand identity that Leadership and employees are energized about the new strategy and feel confident about its upcoming reception in the industry.

According to Frank, customers are starting to notice and comment on the new Tosca. “We’re already seeing more leads and more interest in our work. Our customers understand what we can do for them, and it’s broader than what we’ve done in the past. They understand how we can help them now.” // —Bob Domenz is CEO of Avenue, a Chicago-based hybrid strategy and creative firm whose specialty is helping middle-market B2B companies navigate through times of “big change” and position themselves for next-level growth. He can be reached at bdomenz@avenue-inc.com.

THE ROUND NEWS THAT MATTERS Q&A // Panelists took questions during the “New North American Opportunity” session.

Photo by Privcap Media

Changing the Game of Energy Investment Against a backdrop of rapidly declining oil prices, members of the energy investment community convened in Houston in December to discuss the changing energy landscape.

While the steep decline in oil prices worldwide at times dominated the conversation during Energy Game Change, a conference hosted by Privcap Media, innovation, technological advancement and new opportunities in the sector were cited as reasons for optimism.

John Hofmeister, former president of Shell Oil, shared what he sees as a path toward U.S. energy independence and a more flexible national energy policy that includes oil alternatives.

Meanwhile, Bob Edwards, managing director of private equity firm NGP, pointed to the role of niche players and entrepreneurs in building up oil wells ahead of the majors, noting: “This is a game of constant innovation, local knowledge and niche.”

Opportunity abounds, both in the U.S. as well as the newly opened Mexican energy market, according to experts on the day’s closing panel. David Ocañas of PEMEX, Mexico’s state-owned petroleum company, noted “opportunities in every part of the value chain” for private investors in Mexico.

The one-day conference was held Dec. 11, 2014 at The Houstonian Hotel and featured a series of moderated panels and interactive breakout sessions. Topics included the state of private capital markets, energy investment strategies, perspectives from institutional investors and the new North American opportunity for oil and gas investment. //

THE ROUND NEWS THAT MATTERS

Report Sheds Light on Retail Woes The 2014 holiday season was cause for anxiety for many retailers, particularly those at risk of operational or financial distress, according to a recent PwC report, which looked at underlying factors and examples of distress.

A heavy reliance by retailers on discounts and promotions that can squeeze margins was among the examples of operational distress, the report found. Meanwhile, an inflexible buying strategy can lead to a suboptimal inventory mix, further hurting sales.

Additionally, the inability to negotiate early lease exits can prevent retailers from trimming their brick-and-mortar footprint as they expand their online presence and seek to reduce overhead.

The December 2014 report, “Business Recovery Services Industry Insights—Retail,” also looked at examples of financial distress among retailers.

A lack of tools for forecasting and navigating liquidity events—loan and monthly rent payments, taxes, etc.—can prevent effective cash forecasting, putting the company at financial risk. In addition, liquidity implications under a company’s borrowing base or loan covenants can inhibit operational improvements, while more restrictive payment terms by vendors can further stress liquidity.

Low wage growth, limited household disposable income and low consumer confidence were named as causes for distress among retailers by the report’s authors within PwC’s Deals Practice. These challenges are exacerbated by customers’ expectations of discounts, along with competition from online mass-market sellers like Amazon, the report found. //

THE ROUND NEWS THAT MATTERS

MMG Wins Honors for Content and Design In December 2014, Middle Market Growth received two prestigious awards for excellence in editorial content and design.

The magazine won an "Eddie" award in the category of "association/non-profit (B-to-B)standalone digital magazine—six or more issues" from Folio for its April 2014 issue, featuring a cover story on the retail startup Trunk Club. Folio is the multichannel resource for the magazine and online media industry.

MMG was also recognized by Association TRENDS, an independent weekly newsletter for the association community that holds an annual all-media contest. The magazine took a Silver award in the “monthly trade association” category, moving up from a Bronze in a similar category in 2013. MMG was honored at the 36th Annual Salute to Association Excellence on Feb. 6 at the Capital Hilton in Washington, D.C. "Middle Market Growth delivers important insight about trends, companies and influencers impacting the middle market," said ACG President & CEO Gary LaBranche, FASAE, CAE. "These awards underscore the value of this publication, which, at less than two years old, is rapidly gaining traction with more than 30,000 readers." //

THE ROUND NEWS THAT MATTERS

VERTICAL VIEW // DRIVING GROWTH

3.9 Billion

$

27

%

of PE DEALS

2012 saw $3.9 billion invested across 95 PE deals in the transportation and logistics sector; in 2007, the previous peak for deal volume, $9.4 billion was invested across 108 deals.

Logistics deals have accounted for an increasingly large share of transactions in the transportation sector over the last decade, rising to 27% of PE transportation deals in 2013 from 12% in 2005.

Among the largest deals in the sector since 2010 was the 2011 carve-out of Autoparts Holdings, a maker of consumer automotive brands, by New Zealand-based investment firm Rank Group for $950 million.

Since 2011, M&A has been the most popular mode for PE exits in the B2B transportation sector, outpacing both buyouts and IPOs.

Between 2009 and 2010, PE exits in the transportation and logistics sector rose dramatically to 32 from 13, eventually reaching 45 in 2013.

12 Platinum Equity is among the leading investors in the B2B transportation space, having completed 12 deals since 2009.

Deals

In 2007 and 2008, when the auto industry was having issues, there were a lot of PE acquisitions to scoop up auto-parts suppliers. Since 2010 we’ve been seeing a lot of exits as those investments are realized.”

—Daniel Cook, senior data analyst, PitchBook

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

WHERE YOU NEED TO BE.

APRIL 13 – 15, 2015 W A L D O R F A S T O R I A A N D H I LT O N B O N N E T C R E E K ORLANDO, FLORIDA Capital. Connections. Deals. That’s the InterGrowth promise. One that ACG has delivered on for over four decades. With three dynamic marketplaces available representing $145 billion in investable capital, you’ll walk away with the kind of trusted relationships that will help drive business growth today and well into the future.

•

InterGrowth Lounge—the networking hub of the event

•

ACG DealSource®—your pipeline to investment banks

•

ACG Capital Connection®—connecting you with 100 capital providers

R E G I S T E R T O D AY AT 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.

J.B. PRITZKER & DAVID LEE

DEVELOPING A REFINED

PALLET Pritzker Group Private Capital Helps PECO Expand Its Role in the U.S. Supply Chain

BY DEBORAH L. COHEN

Photos by Matthew Gilson

PECO PALLET // Business: Shipping pallet rental and repair Headquarters: Irvington, New York Market Share: 12% of North America Private Equity Investment: Pritzker Group Private Capital Customer Base: Leading manufacturers of grocery products and consumer goods Website: www.pecopallet.com

T

he humble shipping pallet—nearly invisible to users of the merchandise it helps transport—could well be the unsung hero of consumer products distribution.

This simple platform, often made of wood or plastic, functions largely behind the scenes as it moves through myriad stops in the supply chain, from manufacturer to warehouse to retailer and back again. In most instances, it fades back into the endless cycle of shipping and receiving removed from customer view, known only to packers, stock boys and store clerks.

But the pallet is far from insignificant. Without it, everything from dry goods to perishables such as milk, meat and dairy could not easily be shipped, warehoused or arranged on store shelves.

PALLET PALOOZA // The depot is one of many points in a pallet’s continuous journey.

“I never thought anybody could be passionate about pallets,” says J.B. Pritzker, the billionaire investor and philanthropist whose private equity firm purchased PECO Pallet Inc., a small but promising North American supplier of wooden pallets, in March 2011. “But I have to say, three and a half years later, I am passionate about pallets.”

Pritzker and his brother, Tony, best known in the investment community for their interest in technology startups, are also stalwart supporters of middle-market companies like PECO. The portfolio of their investment firm, Chicago-based Pritzker Group Private Capital, includes a host of other little-known industrial holdings such as Technimark, a producer of plastic packaging; Signicast, a maker of custom metal components for motorcycles and machines; and Milestone AV Technologies, a provider of projection screens and other AV equipment— none too sexy, but typically steady middle-market performers.

So it was no surprise the firm was drawn to PECO’s quality product, high level of customer service and its potential to take additional share from larger rivals, namely CHEP, which controls the lion’s share of the market, says Pritzker. The major impediment to PECO’s growth was the lack of capital required to go after big consumer-goods accounts.

DAVID LEE // PECO’s CEO is leading the company into new markets.

To win new business, pallet suppliers must be willing to put up large amounts of cash, mostly to purchase more pallets to cover the scope of a manufacturer’s extensive distribution network, he says. Even winning a small food manufacturing account requires a significant outlay.

“The customers of their competitor didn’t really love the competitor, so we said, ‘Why aren’t you doing business with PECO?’” Pritzker recalls.

“We said, ‘What a great opportunity. We can help grow the company.’”

DEEPER POCKETS, MORE PALLETS Today, with the benefit of the Pritzker Group’s deep pockets and longterm buy-and-hold approach to investments, PECO’s share of the North American pallet rental and distribution market has nearly doubled to roughly 12 percent. Meanwhile, it has grown year-on-year revenue more than 25 percent in each of the past four years ended in 2014, according to CEO David Lee. The company has also carved out a significant niche in the food-service sector.

“WE GOT INTO THE BUSINESS OF REALLY UPGRADING THE ORGANIZATION, GOING BACK TO CUSTOMERS WITH A DIFFERENT VALUE PROPOSITION.” David Lee CEO, PECO Pallet

PECO employs nearly 200 workers through its North American network and oversees an additional 500 or so through more than 50 distribution depots and refurbishment facilities operated with third-party relationships. It has followed the expansion path of major retailers such as Costco, pushing north into Canada and south of the border into Mexico.

The 65-year-old British-born Lee, a former GE Capital executive, took the helm of PECO in 2005 when the company was functioning primarily as a discount operator for private-label suppliers to club stores. He was well-suited to undertake expansion, having earlier cut his teeth at the company’s much larger worldwide rival, CHEP. Lee helped to launch CHEP’s U.S. operations in 1990.

CHEP, which is owned by publicly traded Australian supply-chain logistics company Brambles Limited, declined through a spokesman to comment about competition in the United States.

“We spent a bit of time trying to sort things out,” Lee says. “We got into the business of really upgrading the organization, going back to customers with a different value proposition.”

PECO, founded in 1990, obtained early investment capital from White Mountains Insurance Group, Walnut Group and MK Capital. Under Lee’s direction it secured a debt facility from Golub Capital, allowing the business to shift from a low-price discount model toward the higher level of quality and service sought by branded accounts. After adding more leading manufacturers and distributors to its service network, PECO was beginning to attract the attention of private equity, eventually appearing on the Pritzkers’ radar.

“They were alarming and tortuous—but only in the nicest possible ways,” jokes Lee, recalling one impromptu visit with a worker at a Costco distribution facility during the Pritzker Group’s due diligence. “J.B. looked at me and he said, ‘You stay here, I’m going to go talk to him.’ He went over and talked to this guy for 10 or 15 minutes. He said,

PALLET PASSION // Part of PECO’S culture of quality.

‘The guy has assured me, your pallets are usually the best.’ That’s it, the deal was done.”

Both parties agree it’s been a good match.

Besides capital, the Pritzkers provide the clout required to cement big deals, including a national partnership with food manufacturing giant Kraft Foods. “(J.B. Pritzker) called the CEO of Kraft and had a conversation with him,” Lee says. “J.B.’s contribution was to go in and say, ‘Hey, we stand behind this. We’re supporting this.’”

To be sure, Lee’s own enthusiasm for pallets is overwhelming. He has an encyclopedic knowledge of them—size, 48 by 40 inches; weight capacity, 2,800 pounds; number of average shipments, 700 million annual trips in North America alone; average time spent at a manufacturer, 30 days; and so on.

“The common denominator to all of this is your product on pallets,” he says. You’ve got it on pallets because pallets enable you to handle the product efficiently.”

HIGH STANDARDS // Quality comes first during pallet inspection.

NOT SO SIMPLE Lee says PECO’s business model may seem simple to outsiders, but it’s actually fairly complicated. The company must ride herd on a logistics network of some 7,000 nodal points—warehouses, depots, distribution centers, manufacturers, etc.—throughout the country, ensuring its pallets get where they are supposed to on time, constantly inspecting and refurbishing them to ensure good condition.

The pallets remain in a secure loop—they move by truck from a depot to a manufacturer where they’re loaded up with goods and shipped to a retailer. Once unloaded, they then cycle back through a depot. Before being reissued, they are cleaned, checked and repaired; the process, called pooling, allows the pallets to be used by multiple manufacturers.

“Everything is done electronically in real time—it’s how we speak to our customers, how we speak to our vendors, how we negotiate and contract our carriers,” Lee says, adding that private equity dollars have allowed for significant technology improvements, including the ability for customers to better manage their operations online.

In the low-margin grocery business, tight control over the supply chain makes a big difference to a retailer’s profit, says Paul Weitzel, a managing partner with retail consulting firm Willard Bishop.

“Grocery stores get deliveries from their warehouses every day and manufacturers are shipping to warehouses once a week,” Weitzel says. “It’s a moving business.

The inventory turns are pretty quick, and when you’re moving that much product fast, you need a system that’s reliable. You’ve got to be as efficient as you can.”

A broken or damaged pallet can result in spoiled product, or worse, an accident in the warehouse or store that could lead to personal injury, he says.

Maintaining high-quality pallets is especially important for a warehouse chain like Costco. Unlike most retailers, its pallets are stacked in the open on the same shelves where customers shop for merchandise, says John Thelan, senior vice president of depots and traffic for the Issaquah, Washington-based company.

“We have a safety issue, so the quality of our pallets is very important to us,” says Thelan, who directly oversees 34 Costco depots and has been working with PECO since its inception. “It’s a very secure relationship. They (PECO) keep a very tight channel and they get their pallets back in a timely fashion so they can rent them again.”

That is the kind of endorsement that gives David Lee confidence PECO will continue to carve out share in the North American consumer supply chain market. He expects the company to grow strongly in 2015.

“We have a service that our customers hopefully will buy into, not for the next five years but for eternity,” Lee says. “Pritzker Group has reminded me that they are what they call long-term capital, geared to grow the business.

And that’s perfect.”// Deborah L. Cohen is editor-in-chief of Middle Market Growth.

“PRITZKER GROUP HAS REMINDED ME THAT THEY ARE WHAT THEY CALL LONG-TERM CAPITAL, GEARED TO GROW THE BUSINESS.” David Lee CEO, PECO Pallet

HOW PECO PALLET POOLING WORKS //

PALLET ISSUE

1

Pallets are shipped to renter upon order

MANUFACTURER (RENTER) Loads pallets with product

PECO pallets are kept in a secure loop and are always cycled through a depot before being reissued

PALLET RECOVERY Empty pallets are returned to depot

3 DEPOT Inspects and cleans all pallets, then makes repairs as needed

2 DISTRIBUTOR (RETAILER) Unloads goods and sorts empty pallets

PALLET TRANSFER Loaded pallets are shipped to distributors

Why Investors Are Adding Independent Sponsors to Their Sourcing Networks

PRIVATE EQUITY’S

SECRET WEAPON

BY SUSAN NADEAU

A

bout 11 years ago, Huron Capital Partners LLC got a tip about an investment opportunity. A group of executives wanted to form an entity to acquire specialty chemical companies, but they needed funding. Huron Capital, a Detroit-based private equity firm, jumped at the opportunity. The tip came from a source now known in the private equity world as an independent sponsor, essentially a freelance agent who connects companies seeking private capital with would-be investors.

“The independent sponsor helped us put together this concept of the umbrella company,” says Christopher S. Sheeren, a partner with Huron Capital and member of ACG Detroit, noting, however, that the “independent sponsor” title did not exist at that time.

The independent sponsor joined the board of the newly created platform company and was very helpful in due diligence as the business went ahead with its plan to acquire several other companies. “She had a calming influence and was a smart deal person,” Sheeren recalls.

Huron Capital exited the business, Quest Specialty Chemicals, seven years later. “It was a great deal,” Sheeren says.

“THE REST OF THE PRIVATE EQUITY WORLD, IN THE PAST TWO YEARS, HAS BEEN DISCOVERING THE INDEPENDENT SPONSOR COMMUNITY MUCH MORE.” Christopher S. Sheeren Partner, Huron Capital

Since then, independent sponsors have accounted for around 20 percent of Huron Capital’s new platform investments. “We have been at it longer than most,” Sheeren says. “The rest of the private equity world, in the past two years, has been discovering the independent sponsor community much more.”

Rebranding themselves and expanding in numbers and influence, these entities—some one- and two-man shops, others multifaceted firms with executives racking up decades of experience—are gaining traction and becoming more active, and increasingly more important, to the private equity market.

BACK TO THE FUTURE The independent sponsor model is not new, but the name is.

Previously, these deal-sourcing representatives were known as “fundless sponsors”; while this was an accurate designation, some felt the name gave a negative connotation.

“What’s funny about this trend is that the private equity business actually started with folks raising funds on a dealby-deal basis,” says Nicholas Russell, a partner with Tuckerman Capital, a private equity firm that has always invested exclusively in partnership with independent sponsors. “It’s kind of a ‘back to the future’ trend.”

It wasn’t until the 1970s that the first private equity funds were raised, sourcing money first and then looking for investment opportunities.

There is no set recipe, but essentially an independent sponsor seeks to find a potential investment, executes a letter of intent and then reaches out to an investor network to raise capital for a specific deal. That network may include conventional private equity firms or other investors, such as family offices, with money to invest. The terms of the deal depend on the sponsor and the funder.

Some independent sponsors are small shops, such as Knox Capital Holdings LLC. Its founder, Alex E. Gregor, has already signed two deals in the year since he left a traditional private equity firm and partnered with an experienced chief executive in the manufacturing industry. Gregor saw the opportunity to do deals that didn’t fit the constraints of a typical private equity investment duration, for example, at a smaller cost to investors. He now works with family offices as well as other flexible capital providers.

“We were buying smaller middle-market businesses that are not suited for a short time frame,” Gregor recalls. He says, for instance, that he now looks for companies that could grow from $5 million EBITDA to $40 million, “but that may take longer than five years.”

A larger independent sponsor, Chicago-based Akoya Capital Partners LLC, has extensive operations. It offers transactional expertise, human resource capabilities and dedicated deal-sourcing resources; five industry experts bring decades of senior management experience in Akoya’s focus areas of consumer foods, specialty chemicals, professional information services and consumer products. Since 2005, the firm has completed 13 platform investments and several add-ons.

“The cornerstone of everything we do is bringing relevant and deep operating and domain expertise to identify, close and grow our portfolio companies,” says Max DeZara, the firm’s founder and managing partner and a member of ACG Chicago. “We buy good companies and make them excellent through great operational leadership.”

DeZara participates in and chairs private equity and M&A panels at industry conferences and has seen independent sponsor attendees grow from just a small handful to a significant number over the last decade— today they account for a recognized and meaningful segment of the private equity market, he says.

Tuckerman’s Russell says his database of potential deal partners has grown in the past three years to nearly 900 independent sponsors from 500, and he is confident there are more out there. He says some industry estimates are as high as 4,000.

The role of independent sponsors ranges from brokers who are essentially good at finding deals but don’t want to remain involved in the process, to those who take a position in the acquired companies and typically invest their own money as well.

“THESE INDEPENDENT SPONSORS ARE ABLE TO FIND A WAY INTO THE MARKETPLACE BY FOCUSING ON PARTICULAR NICHE INDUSTRIES OR SITUATIONS.” Andrew T. Greenberg CEO, GF Data Resources LLC

“The phase that neither of us enjoyed was the fundraising,” says Ronald J. Duncan, a member of ACG Central Texas who partnered about a year and a half ago with a long-time friend to form Barton Creek Equity Partners LLC. They focus specifically in Texas on manufacturing and the B2B industry.

“We get the opportunity to do 100 percent of what we love,” Duncan says.

Some independent sponsors formerly belonged to traditional private equity firms, but had reasons for leaving.

Gregor, who works mainly with family offices, cites the commitment to a holding period that accompanies private equity investments, and his desire to be more entrepreneurial and have other experiences. He was named chairman of the board of TRS Global, an acquisition he found for Tuckerman.

Others cite consolidation among traditional PE funds: Private equity has become hypercompetitive as fewer funds— those with exceptional proven track records—are getting most of the investment money, leading other funds to disband.

Still others talk of little room for advancement in traditionally structured private equity firms, even those that are well funded.

“As some private equity funds become larger and more top-heavy with partners, the path for a VP or a junior partner is more challenging,” says Justin M. Kaplan, a member of ACG New York and ACG Philadelphia and a partner with Balance Point Capital Partners, which sources about 25 percent of its deals via independent sponsors. “This is a way for them to control their own destiny.”

JUST HOW BIG OF A DEAL IS THIS? Industry players agree that independent sponsors are involved in just a small slice of all global private equity deals. These tend to be lower middlemarket transactions, typically ranging from $10 million to $80 million, and certainly under $100 million.

But independent sponsors as well as traditional private equity firms say the trend is growing, and rapidly, for a number of reasons. There are more sponsors rustling up deals, the deals tend to be somewhat out of reach for traditional PE firms and the sponsors are essentially extensions of their private equity firm partners, with the stipulation that the sponsor gets paid only if the deal closes.

GF Data Resources LLC, which tracks private equity investment, does not specifically mark deals done with independent sponsors, but CEO Andrew T. Greenberg, a member of ACG Philadelphia, says the data show that a more focused group of established entities is working with private equity. “These independent sponsors are able to find a way into the marketplace by focusing on particular niche industries or situations,” he says. “My impression is that many of the larger investment companies in middle-market private equity look at these firms as an outsourced business development arm.”

The Riverside Company is becoming one of those companies.

Riverside’s Jim Butterfield, principal, origination and a member of ACG Atlanta, says just 2 percent of deals that made it to the firm’s committee phase originated from independent sponsors, but he expects that number to increase. The sponsors tend to bring “more quirky” deals that require extensive relationship development that independent sponsors are well-suited for.

And many times the owners of smaller companies want to keep the process discreet, or they don’t want to deal with multiple management presentations, he says.

“We will be giving this deal source a greater emphasis going forward in 2015 and beyond, as some of our best deals, in terms of cash-on-cash returns, have come from this category,” Butterfield says.

Barton Creek’s Duncan, the independent sponsor in Texas who worked with Tuckerman, says the model just makes sense. “It costs (PE) absolutely nothing to have relationships with 10 guys like me looking at 100 different opportunities,” he says. “That’s 1,000 touches. (Tuckerman has) drastically magnified the size of their general partnership. It’s a pretty crafty business model.”

And others want access to the sponsors’ niches.

“You have firms like my firm that are seeking fewer bank shop deals, and independent sponsors are historically more able to find deals that are under the radar,” Balance Point’s Kaplan says.

In addition to private equity firms, family offices and other non-PE capital sources are now more willing to consider direct investment, not just blind pools or hedge funds. In doing so, they are starting to work with independent sponsors.

“There is no shortage of capital—that’s a commodity,” says Akoya’s DeZara. “The scarce asset is finding the right company, developing the right growth strategy and being able to execute through a great leadership team.” // Susan Nadeau is a business writer who splits her time between Hartford, Wisconsin, and Thessaloniki, Greece.

WHAT YOU NEED TO KNOW.

APRIL 13 – 15, 2015 W A L D O R F A S T O R I A A N D H I LT O N B O N N E T C R E E K ORLANDO, FLORIDA Knowledge is power. And InterGrowth 2015 is your key to accessing the latest trends and best practices from leading authorities. Whether it’s one of the 30 executive roundtable discussions, four breakout session tracks or two keynote presentations, you’ll have all the expertise you need at your fingertips. Take a look at InterGrowth’s keynote presenters this year: • Salim Ismail, technology futurist and “Exponential Organizations” author • Greg Norman, golf legend and Great White Shark Enterprises CEO, interviewed by CBS Sports’ Greg Gumbel.

R E G I S T E R T O D AY AT 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.

QUICK TAKES PETER E. MOGK // Senior Partner, Huron Capital Partners

Huron Hits the Gas in Used Car Market

W

hat happens to all those used vehicles that new car buyers trade in?

New car dealers may try to unload them at retail on their own lots; more often than not, after a short period of time they’ll sell them to dedicated used car dealerships.

But finding a would-be buyer for a 1995 blue four-door Ford Taurus isn’t easy for a Mazda

dealer. That’s when an auctioneer like XLerate Group enters the scene, providing dealer-todealer services ranging from auctions to title transfer, logistics and pricing data.

“We act as the middleman,” says Peter E. Mogk, a member of ACG Detroit and a senior partner with Detroit-based private equity firm Huron Capital Partners, which purchased the business in May 2014. “What we’re doing is matching buyers and sellers.”

XLerate operates 16 locations in South Carolina, California, Texas, Wisconsin and Florida. Each year, it conducts about 150,000 transactions, hosting auctions physically on its lots and online simultaneously for the benefit of remote buyers.

Its services include everything from guaranteeing payment, title transfer, refurbishment, minor repairs and arbitration, such as helping to negotiate a price adjustment if a car coming on the auction block has an unforeseen flaw like a leaky valve.

Continued on next page

QUICK TAKES PETER E. MOGK // Senior Partner, Huron Capital Partners “IN GOOD TIMES AND BAD, PEOPLE NEED TO HAVE TRANSPORTATION. IT’S A BIG MARKET.” “We know who the buyer is; we have done credit and background work on them—we guarantee their payment, we take payment from them,” Mogk says. “We hand them the car, we hand them the title and we cut the check immediately to the dealer who sold the car.”

XLerate also arranges shipping with third-party providers and runs so-called privatelabel auctions solely on behalf of large dealerships with enough volume to support them.

In addition to large franchised dealerships, XLerate’s sellers include co-ops, leasing companies, car rental fleets and banks that have repossessed cars from delinquent customers. Each transaction grosses between $300 and $400 in fees, Mogk says.

Huron is bullish on the business: Mogk notes the used car market is less cyclical than the market for brand-new vehicles. XLerate is hoping to cash in on a larger stake of the market, which Mogk says each year includes more than 40 million transactions, or more than double those of new car sales.

“In good times and bad, people need to have transportation,” he says. “It’s a big market.” //

Huron Capital Partners is a Detroit-based private equity firm focused on lower middlemarket companies. Peter E. Mogk is responsible for sourcing, evaluating, executing and managing investments made by the firm.

—DLC

A QUALIFIED OPINION DAVID MITCHELL // Managing Director, Transportation Resource Partners

D

avid Mitchell is a managing director of Transportation Resource Partners, a sector-focused private equity firm based outside Detroit that is currently planning its fourth fund. Mitchell has extensive experience in the transportation sector, including consulting in the manufacturing and automotive practice of Deloitte prior to joining TRP in 2002.

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SINCE JOINING TRANSPORTATION RESOURCE PARTNERS, WHAT CHANGES HAVE YOU SEEN WITHIN THE TRANSPORTATION AND LOGISTICS SECTOR?

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n the last decade, industry velocity has increased—for example, new automobile development programs have compressed to as few as three years. In the logistics sector, consumers’ expectations for faster deliveries have altered the global transportation network.

Meanwhile, core services such as supply chain management and logistics have become commoditized with improved technology, information systems and automated material handling equipment. Alternative fuels like compressed natural gas and liquefied natural gas, along with electric powertrains and hybrid-electric vehicles, have become mainstream for commercial fleets and consumers.

Finally, regulatory changes in areas like safety and hoursof-service limitations for drivers have pressured fleets to become more productive. To capitalize on these changes, we recently invested in 4Refuel, which provides mobile onsite refueling, saving fleets valuable time. We previously owned Fleetwash, a mobile washing company that services 8 million vehicles annually, often while they’re parked overnight.

Photo by Adam Bird

A QUALIFIED OPINION DAVID MITCHELL // Managing Director, Transportation Resource Partners

D

avid Mitchell is a managing director of Transportation Resource Partners, a sector-focused private equity firm based outside Detroit that is currently planning its fourth fund. Mitchell has extensive experience in the transportation sector, including consulting in the manufacturing and automotive practice of Deloitte prior to joining TRP in 2002.

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ARE THERE PARTICULAR SUBSECTORS WITHIN THE TRANSPORTATION INDUSTRY WHERE YOU’RE SEEING SIGNIFICANT OPPORTUNITIES FOR STRONG RETURNS?

S

ince the downturn, we see a renewed focus on core transportation assets. Shortages in truck and rail capacity from deferred capital investment are providing opportunities for companies. United Road Services, our truck-based automobile hauling business, is receiving requests for longer hauls due to rail constraints.

We continue to focus on outsourced services for fleets and dealers. We’ve had three successful prior investments in training and believe there will always be opportunities for improved education and safety training. We recently sold Smith System, which focused on collision-avoidance driver training for commercial fleets.

We also like new car and aftermarket products and services marketed through dealerships. A prior investment, Commonwealth Laminating & Coating, manufactured and distributed solar-control window and paint protection films. We’ve also seen a recovery in the areas of nonprime and subprime lending, insurance products and extended service contracts.

Photo by Adam Bird

A QUALIFIED OPINION DAVID MITCHELL // Managing Director, Transportation Resource Partners

D

avid Mitchell is a managing director of Transportation Resource Partners, a sector-focused private equity firm based outside Detroit that is currently planning its fourth fund. Mitchell has extensive experience in the transportation sector, including consulting in the manufacturing and automotive practice of Deloitte prior to joining TRP in 2002.

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AS A SECTOR-FOCUSED FIRM, TO WHAT EXTENT HAS A “BUY AND BUILD” APPROACH FACTORED INTO TRP’S STRATEGY?

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RP’s strategy is to focus on growth-oriented investment opportunities where our industry knowledge, resources, contacts and synergies can create meaningful value. With an average holding period for investments of over five years, the TRP playbook focuses on initiatives supporting organic growth, greenfield expansion, acquisitions, customer development and maximizing synergies.

We spend significant time developing synergies between our portfolio companies and key strategic investors and affiliates. We’ve had numerous cases where portfolio companies have become customers of each other or have supported business development initiatives by making customer or supplier introductions.

We believe cross-portfolio relationships are a unique characteristic of sector-focused funds in general, and the transportation industry specifically offers broad, compelling opportunities for interaction. Our businesses often have five to seven examples each of cross-portfolio synergies.

Photo by Adam Bird

A QUALIFIED OPINION DAVID MITCHELL // Managing Director, Transportation Resource Partners

D

avid Mitchell is a managing director of Transportation Resource Partners, a sector-focused private equity firm based outside Detroit that is currently planning its fourth fund. Mitchell has extensive experience in the transportation sector, including consulting in the manufacturing and automotive practice of Deloitte prior to joining TRP in 2002.

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FOLLOWING THE GREAT RECESSION, WAS THERE A SHIFT IN THE TYPE OF INVESTMENTS TRP PURSUES?

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wo TRP investments capitalized on the recovery from the recession. The first, Around the Clock Freightliner Group, is one of the largest domestic Freightliner truck franchises. Following the 2007 and 2010 emissions regulations and the recession, the average age of trucks reached historic highs as the economy was recovering. New truck franchises presented a compelling way to capitalize on the cycle of fleet reinvestment.

We owned the second firm, National Powersport Auctions, from 2006 until 2010; we then acquired the business again in 2012. As the largest wholesale auctioneer of powersport equipment, the company benefited from the recession as repossessions of motorcycles, ATVs and other units peaked in 2009 and 2010 when we sold. By 2012, powersport lending portfolios had declined and repossessions dried up significantly. We’re now seeing a recovery of credit markets and lending portfolios for consumer purchases, as well as dealer consignments from trade-ins and improved inventory control practices, as drivers of future growth.

Photo by Adam Bird

A QUALIFIED OPINION DAVID MITCHELL // Managing Director, Transportation Resource Partners

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avid Mitchell is a managing director of Transportation Resource Partners, a sector-focused private equity firm based outside Detroit that is currently planning its fourth fund. Mitchell has extensive experience in the transportation sector, including consulting in the manufacturing and automotive practice of Deloitte prior to joining TRP in 2002.

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FROM YOUR VANTAGE POINT, HOW IS AILING U.S. INFRASTRUCTURE IMPACTING TRANSPORTATION OPERATIONS?

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ighways, rail lines and ports continue to be strained by the domestic transportation industry. Upgrades and maintenance of roads and rails, as well as increasing traffic volume, can lengthen haul times in certain high-volume traffic lanes and urban centers. Port congestion and recent West Coast labor strikes can impact product availability across the country.

Logistics companies must respond by helping customers identify the best mode of transportation and point of entry for imported goods to minimize total transit time.

Shippers must continue to weigh factors like rail congestion, truck capacity and fuel prices to make the best economic decisions. High traffic volume, deteriorating roads and aging vehicles create opportunities for dealerships, repair shops and replacement-parts suppliers.

Finally, shortages of qualified workers— commercial drivers, warehouse staff and logistics network engineers—will challenge the industry.

Photo by Adam Bird

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE

CONNECTICUT ORANGE COUNTY TAMPA BAY

TAP CITIES TO NAVIGATE TO ARTICLE

ACG TAMPA BAY

Idea-Sharing Central to New Tampa Bay Breakfast Series Employment law and human resource issues were the themes of an ACG Tampa Bay breakfast event, which featured speakers on those topics and a group discussion among attendees.

During the first installment of the chapter’s nascent breakfast series held in December, local experts Jan Pietruszka, a partner with Shumaker, Loop & Kendrick LLP, and Keri HigginsBigelow, president of LivingHR, gave their insight on scenarios raised by the audience.

The roundtable format allowed for a free-flowing exchange among the event’s 17 attendees and the experts, facilitating meaningful networking and idea-sharing among participants. The chapter plans to host an installment of the series each quarter, addressing different challenges faced by business professionals.

With attendance capped to retain intimacy, the breakfast was well-received by attendees, including one who predicted future meetings were “sure to become first come, first served.” //

ACG@WORK CHAPTER NEWS FROM AROUND THE GLOBE SO-CAL FLAVOR // Panels explored the region’s thriving industries.

ACG ORANGE COUNTY

Capital Summit Debuts Capital Markets Research In November, ACG Orange County held its annual Southern California Capital Summit, featuring the first public release of the executive summary results from Pepperdine University’s Private Capital Markets Project. A panel of capital markets experts commented on the survey’s findings, which were presented by Pepperdine University professor Dr. Craig Everett.

The Pepperdine Private Capital Markets Project surveys 12 capital market segments to understand the latest trends, best practices and changing behaviors of capital providers.

“The Southern California Capital Summit is an insightful and compelling event that allows ACG members and guests the opportunity to learn where professional investors are allocating their capital,” said ACG Orange County President Michael Issa, principal at GlassRatner Advisory & Capital Group LLC. “This event is essential for financial professionals who seek a deeper understanding of how the capital markets function and where future opportunities exist.”

The Capital Summit, an influential forum focused on the demand for and deployment of private capital for corporate growth, featured a keynote address and executive panel discussion, plus a series of sessions exploring five of Southern California’s most dynamic business sectors: apparel, health care, aerospace and defense, technology and real estate.

More than 200 professionals attended the event. //

GROWTH AGENDA // Rep. James Himes during his keynote address.

ACG CONNECTICUT

Congressional Leader Offers Insight on Economy at Connecticut Event The state of the American economy and the business climate in Connecticut were top of mind for speakers and attendees alike at a November economic forum hosted in conjunction with ACG Connecticut.

U.S. Rep. James Himes, D-Conn., gave the keynote address at the 4th Annual Economic Forum. He offered his take on legislative efforts to improve the middle-market dealmaking environment and to foster business growth among midsize companies.

“The business climate in Connecticut is deeply impacted by decisions made in Washington, and Congressman Himes’ vantage point from key finance-oriented House subcommittees, as well as his background on Wall Street, makes him a great guide for navigating this environment,” said ACG Connecticut Chairman Ramsey Goodrich, a managing director at Carter Morse & Mathias.

Panel discussions drilled into the themes of strengthening the economy both nationally and locally, including a session designed as a primer for doing business in Connecticut.

The forum, held at the Dolan School of Business of Fairfield University, was jointly hosted

by ACG Connecticut, the Connecticut chapter of the Turnaround Management Association and the Crossroads Venture Group. More than 125 attendees participated. //

Share your insights on Due Diligence .

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LEARN MORE Questions? Contact Maggie Endres at mendres@acg.org | 312-957-4257.

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THE PORTFOLIO INSIGHT FROM THE EXPERTS

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

IN THIS ISSUE SOUND DECISIONS Distressed M&A transactions structured out of court may come with serious issues related to pension obligations and successor liability.

BY THE NUMBERS To counteract higher transportation costs in the post-recession environment, companies should evaluate shipping processes and work to increase efficiency.

MID-MARKET TRENDS Recent private equity deals in the construction sector are leading some investors and owners to overcome their differences in pursuit of shared success.

COMING SOON Check out the Portfolio section of the April 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 Meredith Rollins, (312) 957-4260.

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

THE PORTFOLIO SOUND DECISIONS // Thomas M. Wearsch and John J. McGowan, Jr., Partners; and George Klidonas, Associate, BakerHostetler

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Buying a Troubled Co. With Pension Overhang: Must You Pay More for Certainty?

U Unfunded pension obligations and successor liability can become serious issues in out-of-court transactions.

sing the bankruptcy process to complete distressed M&A transactions remains commonplace, but the use of non-bankruptcy alternatives has grown in recent years. Buyers often favor out-of-court options that include secured party sales under Article 9 of the Uniform Commercial Code, known as the UCC, because they can be consummated quickly and are substantially less expensive.

But buyers beware: Certain claims

outside bankruptcy can be liable for the

thought to be avoidable in the context of

unfunded multiemployer pension plan

a bankruptcy sale have become major

contributions owed by the seller if a high

issues when structuring transactions out

level of business continuity is at stake

of court. Among the most daunting is the

and the buyer had notice of the liability.

treatment of unfunded pension obligations

Further, the 2nd U.S. Circuit Court of

of target companies and the potential for

Appeals held that a purchaser of assets in

successor liability.

a secured party sale can still be liable for

Whether or not a sale can be completed

the target company’s unpaid or delinquent

out of court often turns on whether the

contributions to a multiemployer

pension plan at issue is a single-employer

plan. Thus, the UCC does not cleanse

or multiemployer plan. While both

multiemployer pension obligations.

types are regulated under Title IV of the

Recently, the United States Bankruptcy

Employee Retirement Income Security Act,

Court for the District of Delaware

or ERISA, courts and regulators view the

confirmed that assets of a debtor with

potential for successor liability

substantial multiemployer pension plan

very differently.

liabilities could be sold, pursuant to 11

The vast majority of cases imposing

U.S.C. § 363(f), free and clear of the plan-

successor liability on the acquiring

related liabilities. It did so by sharply

entity arise in the multiemployer plan

distinguishing the 7th Circuit’s holding in

context. Several federal appeals court

a 1995 case that successor liability claims

circuits—including the 2nd, 3rd, and

could be asserted by a multiemployer

9th Circuits—have held that a buyer

pension plan against a company that had

THE PORTFOLIO SOUND DECISIONS // Thomas M. Wearsch and John J. McGowan, Jr., Partners; and George Klidonas, Associate, BakerHostetler

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS acquired a bankrupt company’s business

Thomas M. Wearsch

assets through what amounted to a

company has a separate ownership group

secured party sale. Although the decision,

from the target, it is indeed possible to

commonly known as Tasemkin, has given

structure a secured party sale or other

practitioners great pause, the 7th Circuit

out-of-court transaction that leaves

refused to disturb prior authority holding

the pension liabilities with the seller.

that successor liability claims would not

While unfunded pension obligations

lie against a buyer purchasing business

create difficulties for distressed M&A

assets in a Section 363(f) bankruptcy sale.

transactions, advance diligence and

Alternatively, courts have been

John J. McGowan

In conclusion, when the purchasing

counsel allow for proper deal structuring

reluctant to impose successor liability on

that will minimize the likelihood that

purchasers of the assets of companies

successor liability for such contributions

with unfunded contributions to single-

will flow to the purchaser. If the unfunded

employer pension plans. While these

pension obligations are meaningful, and

liabilities clearly can be avoided in a

depending on a review of the pension

bankruptcy sale under Section 363, it is

plan, the buyer should consider paying

possible to structure transactions out

a premium to complete the sale in a

of court where these liabilities do not

bankruptcy case. //

follow to the successor entity. Generally, George Klidonas

courts and regulators consider whether

BakerHostetler is a Cleveland-based law

there has been a change of ownership and

firm with more than 900 lawyers who assist

management or other substantial change

clients globally across five core practice

to the business operations.

groups: litigation, business, employment, intellectual property and tax.

THE PORTFOLIO

BY THE NUMBERS // Carl Offhaus, Senior Advisor, TriVista

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Keep Your Products Moving Without Breaking the Bank

T Controlling costs and capitalizing on available efficiencies help to ensure affordable product transportation.

here’s no doubt about it: When it comes to transportation, economic fluctuations have had a huge impact. Within a decade, the logistics industry has done a 180—ten years ago, an overabundance of trucks and drivers vied for companies’ precious cargo by offering competitive pricing; today, a smaller number of transportation companies find themselves hard-pressed to meet their commitments, despite considerable rate increases.

It’s a simple matter of supply and

Even skilled rate negotiators, who in

demand. The recession took its toll on

years past expertly bargained for the best

the logistics industry, driving thousands

deals, aren’t able to produce the same

of trucking companies out of business.

results in the current environment. Today’s

Now that the economy is on the rebound,

marketplace is conspiring against them,

the gap left by extinct carriers is tangible.

and carriers now undoubtedly have the

With a significant shortage of both trucks

upper hand. According to Forbes, private

and drivers, the market naturally answers

U.S. trucking companies posted their

to the highest bidder. So how can you keep

fourth year of higher sales in 2013 with net

your products moving and still control

margins averaging 6 percent, compared

costs in this challenging scenario?

with 3 and 4 percent in recent years. In fact, the trucking industry’s outlook is so

RATES ALONE WON’T CUT IT

peachy and the driver shortage so severe

When it comes to transportation,

that drivers are being snatched from

substantial cost reduction incorporates

school before getting their certification,

two important components: rate reduction

while trucking companies are resorting to

and process improvements. For many

incentives in order to lure enough drivers

companies, the emphasis has been placed

to keep their fleets on the road. So unless

primarily on rate reduction, which

an organization is planning to launch its

remains important. However, having the

own trucking division, it might be time

right logistics framework in place is just

to start considering other viable ways to

as effective, if not more so, for managing

improve the shipping process besides just

transportation costs.

benchmarking freight rates.

THE PORTFOLIO

BY THE NUMBERS // Carl Offhaus, Senior Advisor, TriVista

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

PROCESS IMPROVEMENTS— KNOWING VS. DOING

•• Consolidating freight, using multistop

It’s common knowledge that next-day air

truckloads (inbound or outbound), or

shipping is significantly more expensive

outbound pool distribution

than ground shipping, or even two-day Carl Offhaus

MISSED OPPORTUNITIES

•• Product diversification within a

air. But do you have a system in place that

container to maximize cube utilization

controls which shipments are authorized

(shipping a small heavy product with

for next-day versus ground? And if your

a large lightweight product)

company is unable to avoid high-cost

•• Incorrectly applied customer discounts

shipments, are these costs being recovered

(customer did not meet the minimum

from suppliers or customers when possible?

order requirement but was still given

Now consider the frequently overlooked mode shift. Could the use of alternate

a discount) •• Network optimization (location of

transportation modes produce significant

manufacturing facilities in relation to a

savings at your organization? Rosalyn

supply base or customer base)

Wilson, author of “The Annual State of Logistics Report,” has indicated that a

These types of missed opportunities are

trucking capacity crunch is taking place in

fairly prevalent. Perhaps an organization’s

the U.S., prompting shippers to find other

supply chain has grown more organically

options, especially intermodal service, to

than strategically. Perhaps its customer

move freight. For a company importing

base has shifted. Or perhaps the company is

product from say, China, the mode shift

the sum total of a number of mergers and

opportunity may be from air to ocean since

acquisitions with an array of mismatched

international air freight costs 10 times

systems and methodologies.

more per pound than a full container ocean shipment. Whether or not a company has

TAKE ACTION NOW

the forecasting ability to capitalize on these

The sooner improvements are

savings is a different story. If not, this may

implemented, the sooner costs are cut

signal a lack of agility within the sales and

and savings begin, ultimately leading to a

operations planning process. When there’s

greater return on investment. Being aware

potential to save 90 percent in shipping

of potential improvement is all well and

costs, it’s likely well worth the investment

good, but in order to change things at your

to pursue improvements.

company, you must embrace change.

THE PORTFOLIO

BY THE NUMBERS // Carl Offhaus, Senior Advisor, TriVista

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS Putting an action plan in place will

It’s no secret that process improvements

require dedicated professionals with the

typically outweigh the benefits of rate

expertise, time and ability to implement

negotiations, as they are part of a more

plans successfully without bringing the

comprehensive long-term strategy, and in

entire operation to a halt. Although this

today’s recovering economy, this couldn’t

may sound overwhelming, experts can

be more true. However, many organizations

identify these opportunities, as well as

overlook common process improvements

accelerate the payback by implementing

by focusing their time and energy solely

process improvements faster.

on rate reduction. Taking an in-depth look

Global consulting firms specializing

at processes will provide valuable insight

in logistics make it their business to

that can be used to streamline operations

know the ins and outs of shipping, both

now and going forward, making the

locally and abroad. A shipper in need of

organization agile enough to meet future

process improvement can leverage this

demands regardless of the economy, the

expertise to gain a deeper understanding

volatility of markets or the escalation of

of the marketplace, its place in it and

freight rates. //

ways in which it can address the greatest challenges effectively. You’ll walk away

Carl Offhaus is a senior advisor with

with a roadmap that leads to performance

TriVista. He is a supply chain management

and profit improvements designed to help

professional who has worked with some

your company withstand any changes the

of the world’s largest companies to drive

economy throws your way.

change and improve performance.

THE PORTFOLIO MID-MARKET TRENDS // Jack Callahan, Partner, CohnReznick; Jeremy Swan, Principal, CohnReznick; and Matthew Katz, Managing Director, FdG Associates

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS

Building a Bridge Between PE and the Construction Sector

T By overcoming differences, private equity funds and construction businesses can capitalize on opportunities for successful deals.

he construction industry and private equity investors have not always seen eye to eye. PE investors have largely avoided the construction sector due to a number of inherent risks, such as the cyclical nature of the business, unmet expectations related to financial requirements of construction firms (e.g., bonding), succession planning and professional management. Construction company owners, meanwhile, have had a longstanding apprehension about outside investors. However, the success of recent deals in the industry, including several led by private equity firm FdG Associates, is proving that private equity and construction companies can indeed build a future together.

Q

Why has private equity lagged

Jack Callahan: I don’t think the industry

in the construction industry?

has as positive a perception in the market

Matthew Katz: One of the fundamental

as it deserves. You only hear about the

issues in the industry is people. This is

problems—the contractor who built

an industry that has often struggled to

houses and cut every corner. You’re

attract talent with the kind of resumes

not hearing the story of how much (the

that private equity firms look for. The

construction industry) has done for

businesses that are going to be successful

communities in building roads, bridges,

in this market and command the

schools and hospitals.

attention of investors—and, ultimately, a reasonable valuation—are those that have made a substantial investment in building talent. Business owners who

Q

Which segments of the industry are most appealing to private equity investors?

want to distinguish themselves and

Matthew Katz: Private equity participates

stand out from the crowd can do that by

in this industry by following the

ensuring that hiring is based on skills

headlines. When the economy is beaten

and qualifications and establishing a set

down and starting to recover, everybody

of systems, processes, and checks and

starts thinking about the residential

balances before going to market.

market. When the headlines are

THE PORTFOLIO MID-MARKET TRENDS // Jack Callahan, Partner, CohnReznick; Jeremy Swan, Principal, CohnReznick; and Matthew Katz, Managing Director, FdG Associates

SOUND DECISIONS

BY THE NUMBERS

MID-MARKET TRENDS

TAP BUTTONS TO NAVIGATE COLUMNS screaming about decrepit bridges and the dismal state of infrastructure in the

the regulatory impact and the overall

country, there seems to be more activity

market environment. So when we get

and interest in the infrastructure market.

a company ready for private equity

The public-private partnership— Jack Callahan

Jeremy Swan

They understand the business models,

conversations, we help them understand

or P3—is one of the more interesting

which firms they should be talking to.

opportunities in the construction industry

And, of course, we help them prepare for

right now, but it comes with some

those conversations by looking at their

real limitations. There are numerous

management team, the quality of their

components—the non-operating

financial data and the infrastructure of

component, meaning the financing and

the business to make sure that everything

concession component, is not a private

is aligned appropriately.

equity game, and certainly not a small-cap private equity game. Institutions that play at that level are large firms with very deep

To read the full discussion, visit CohnReznick’s website. //

pockets and holding periods measured

Matthew Katz

in the 15-year-plus range. It is virtually

CohnReznick is an accounting, tax and

impossible for a middle-market private

advisory firm with over 2,500 employees

equity firm to participate in a P3 directly.

serving more than 20 different industries.

Q

What do mid-market construction

FdG Associates is a New York-based

firms need to know about

private equity investment firm with a focus on

private equity?

recapitalizations and management buyouts of

Jeremy Swan: The most important thing is to really understand the value that a private equity firm can bring and realize that what it brings to the table is more than just money. Many private equity firms have deep industry specialization.

middle-market businesses.

THANK YOU ACG GLOBAL PARTNERS ACG Global thanks the following Partners who play a critical role in supporting ACG’s mission of Driving Middle-Market Growth.SM OFFICIAL SPONSOR OF GROWTHSM PARTNER

GROWTH LEADER PARTNER

GROWTH CHAMPION PARTNER

GROWTH SUPPORTER PARTNER

For information on becoming an ACG Partner, download the ACG Global Partnership Program Prospectus or contact Meredith Rollins, mrollins@acg.org/312-957-4260 or Christine Melendes, cmelendes@acg.org/312-957-4277. ©2015 Association for Corporate Growth. All Rights Reserved.

THE LADDER ACG MEMBERS ON THE MOVE RGL Forensics, a forensic

Stephen Prostor, a member of

accounting and consulting

ACG Global’s board of directors

firm headquartered in Denver,

and ACG New York, was named

announced the opening of its

head of sponsor finance, North

newest office in Dubai to meet

America at Citi Private Bank.

the needs of clients with business interests in the Middle East.

Stephen Prostor

Prostor will lead origination, structuring, underwriting, syndication and portfolio

Orangetheory Fitness,

management of the firm’s

a franchised interval fitness-

sponsor finance business.

training program, was named one of the 2014 Inc. 500 companies.

Generac Power Systems,

Dave Hardy, a partner at the firm,

a manufacturer of backup

is co-founder and past president

power generation products with

of ACG Edmonton.

members in ACG Wisconsin, was named the winner of the

Matt Bergin and Sarah Bowen,

“Best in Business Corporation

both members of ACG Boston,

of the Year for 2014” award by

have joined private investment

BizTimes, a source for business

firm Watermill Group. Bergin is

news in southeast Wisconsin.

now director of transactions, Matt Bergin

evaluating and coordinating

McGladrey LLP, an assur-

potential deals. Bowen is

ance, tax and consulting firm,

director of marketing, working

announced its acquisition of

on marketing and business

Philadelphia-based Fesnak, an

development initiatives.

accounting, business and advisory firm, to enhance its pres-

Sarah Bowen

ence in the Philadelphia market.

David Dunstan, a member of ACG Cleveland, was promoted to president by Western Reserve Partners, an Ohio-based provider of M&A, capital raising

David Dunstan

and advisory services to middlemarket firms.

To submit your promotions, job changes and other accomplishments, please send information and a color photo (hi-res 300 dpi or above) to Associate Editor Kathryn Mulligan.

B-SIDE MICHAEL SINKULA // Co-Founder & Director of Business Development, Envia Systems

APPROACHING INVESTORS… “To tell General Motors, ‘Trust us, we have a little watch-size cell we can eventually put into a big cell for you,’ was difficult. They had to trust our ability to scale up beyond that.”

MICHAEL SINKULA // Drawing on his experience in technology and finance, Sinkula in 2007 co-founded Envia Systems, a company that develops and licenses lithium ion battery materials for the automotive and consumer electronics markets.

STARTING OUT… “Our first office ... was in the Palo Alto public library. We hadn’t raised money yet, so we needed somewhere to go and sit down and call people and discuss things.”

EXCITING TECH DEVELOPMENTS… “The world of genomics has always been interesting to me and what’s possible there as far as detecting disease.”

—KMM

“BATTERIES ARE INTERESTING—YOU EITHER HAVE TO RAISE A TON OF MONEY IN THE BEGINNING, OR YOU CAN’T REALLY DO MUCH AT ALL.”

“THE BATTERY FIELD IS PROBABLY THE SLOWEST-MOVING FIELD IN THE WORLD.”

HERO FROM HISTORY… “(Theoretical physicist) Richard Feynman. He was the one who inspired me to pursue more science-related fields, particularly nanotechnology.”

FILLING A NICHE… “We started (Envia) with the premise that electric vehicle batteries were not sufficient for what the application was. They either cost too much money or didn’t provide enough range.”

INSPIRING FIGURE… “During the first couple of years of our existence, Tesla was also going through ups and downs. It was really inspiring to see (Tesla founder) Elon Musk put a large part of his net worth behind something he believed in.”

IT’S THE SMALL THINGS TRANSPORTATION & LOGISTICS TRENDS // Keep It Moving

1

FROM POINT A TO POINT B-ILLIONS Global demand for passenger and freight rail equipment, infrastructure and related services in 2007 was $169 billion and is projected to grow to $214 billion by 2016.

5

TRUCKIN’ ALONG Nearly 70% of all the freight tonnage, or 9.2 billion tons, moved annually in the U.S. is transported by nearly 3 million heavy-duty Class 8 trucks and more than 3 million truck drivers.

2

RAILING AGAINST CONGESTION High-speed rail is critical to America’s economic future, with congestion on our nation’s highways and runways already costing $130 billion a year and the U.S. population expected to grow by another 100 million in the next 40 years.

6

AMAZON DRONES ON A 2013 demo of Amazon’s delivery-bydrone service, called “Prime Air,” promises a 30-minute fulfillment window from the time a user clicks the “buy” button to delivery at individual customers’ homes.

3

COMPRESSED GAS SAVES MONEY, NATURALLY Switching from diesel to compressed natural gas fuel could save $150,000 per truck over a 10-year period.

7

IT’S ALL ABOUT THE APPLICATION One of the fastest-growing enterprise application markets, the transportation management systems sector has been growing at a doubledigit rate over the last couple of years.

4

GIVE LEASE A CHANCE Online retailing has underpinned over 40% of recent logistics leasing transactions. This trend is expected to continue alongside double-digit annual growth in online retailing over the next four years.

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

Want to tap into the middle market?

LEARN ABOUT ADVERTISING OPPORTUNITIES IN MIDDLE MARKET GROWTH AND REACH 30,000+ MIDDLE-MARKET PROFESSIONALS. CONTACT US OR DOWNLOAD THE MEDIA KIT TO GET STARTED TODAY.

DOWNLOAD MEDIA KIT Contact Meredith Rollins at mrollins@acg.org // 312-957-4260

The official publication of

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

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