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Sunday, 28 September 2014 22:00

As economy improves, deal activity heats up for Charter Capital’s Kerschen

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John Kerschen John Kerschen COURTESY PHOTO

When times were tough, West Michigan advisers found deals were scant and there were but a few investments to arrange.

Now that the economy is at least stable and creating a far more conducive environment for deals, John Kerschen is seeing more business at Charter Capital Partners.

The Grand Rapids-based middle-market investment bank of late served as an adviser on three acquisitions made by Crystal Flash Energy that doubled its locations from nine to 18 and brought in nearly 6,000 new customers and more than $70 million in annual revenue to the company.

Kerschen also co-manages the $15.1 million Michigan Accelerator Fund I that invested more than $1 million into three life sciences companies, serves as the fund manager for the new Novus Biotechnology Fund in Kalamazoo that this year closed its first round by raising $2 million, and advised Grand Rapids Aseptic Manufacturing on a $9.8 million investment round that closed in June.

The transition out of the deep economic recession of a few years ago created new opportunity for Charter Capital Partners. What Kerschen calls “an amazing amount of capital” still awaits deployment, either through M&A or investing in the lower middle market that Charter Capital serves.

“The excess supply of capital is really a driver in what’s getting done today,” said Kerschen, a finalist in the MiBiz 2014 M&A Deals and Dealmakers of the Year Awards in the Adviser category. “The financial buyers and strategic buyers are both in good, strong positions to do transactions.”

The increased M&A activity has significantly driven up transaction values as well, he said.

Amid the better market conditions, however, challenges persist. A number of companies have yet to fully recover from the recession and are unable to jump into the M&A market, Kerschen said.

“There’s still companies that may have a desire to engage in the merger and acquisition marketplace, but they’re still struggling to come out of whatever challenges they had,” he said. “It’s not optimal for them to go to market yet.”

Kerschen joined Charter Capital Partners 16 years ago. In the last several years, he has led the firm as it transformed from a business brokerage operation serving the lower segment of the market into “truly an investment banking firm” with greater capabilities to handle more complex transactions.

“We’re a different organization. My pride comes from watching the transformation over the last six or seven years,” Kerschen said.

Whether representing a buyer or a seller, preparation is the key to arranging and executing a successful transaction, he said. Companies seeking to grow through acquisition need a “conscious plan” for how a prospective deal will fit into a buyer’s long-term growth strategy, “as opposed to being opportunistic when an investment banker calls and you have 30 days to prepare your initial offer and 90 days to get your deal closed.”

“If you plan ahead, you know how an acquisition opportunity fits into your strategic plan, you know what risks you are capable or willing to take on, what your team is capable of taking on, and what your capital structure can support, rather than doing those things in a compressed time and an emotional time,” Kerschen said.

Likewise on the seller side, sellers have to have a plan well ahead of a transaction for how their company will fit into a prospective buyer’s operations. They need to have a succession plan for transitioning the business, he said.

“How do you transition operations and leadership and what risks does that provide?” Kerschen said. “In today’s world, most business owners of any size or success are getting inbound calls from buyers, brokers, competitors and it’s not unusual for them to react to one inquiry or two inquiries and cut a deal before they’ve really figured out where the market is and if it really fits their organization.”

Sellers need to question whether the buyer is right for their companies on a number of levels, he said.

“And not just (on) price. Is it the best fit?” he said.

Sidebar: Finalist - Dealmaker/Adviser

  • John Kerschen, Charter Capital Partners
  • Annual sales: $8 million
  • Full-time West Michigan employees: 14
  • Business description: Investment bank
  • Best practices for effective deal-making: “Surround yourself with a good team and plan ahead,” he said. “Unless you are an active acquirer or an active seller, transactions in today’s legal world and financing world are complex. Unless you do it on a regular basis, it’s very difficult to keep up with all of the requirements, all of the regulations, and the best practices and tools that are out there. It may cost you some money, it may take some time and slow you down, but don’t be afraid to invest in a quality team to surround yourself. (If you don’t), you may save a few dollars on the front end, but you put a lot larger dollars at risk on the other side.”
  • Personal information: Wife, Candy; father of three daughters
  • Education: Undergraduate degree in finance from Michigan State University, 1987; MBA from DePaul University, 1990
  • Community involvement: Board member of the Greenville Area Community Foundation; past president and board member of the Association for Corporate Growth West Michigan; past board member of ACG Global

 

Read 3276 times Last modified on Monday, 08 June 2015 11:58

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