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Sunday, 12 October 2014 22:00

Emotions play into M&A as much as price, experts say

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Participating in the evening’s panel discussion were (L-R) Jeff Helminksi, Blackford Capital; Gordon Lewis, Warner Norcross & Judd LLP; Rob Burch, Kindel Furniture Co. LLC; and John Kerschen, Charter Capital Partners. Participating in the evening’s panel discussion were (L-R) Jeff Helminksi, Blackford Capital; Gordon Lewis, Warner Norcross & Judd LLP; Rob Burch, Kindel Furniture Co. LLC; and John Kerschen, Charter Capital Partners. PHOTO: KATY BATDORFF

Buying a family-owned business requires much more than settling on the right price, mergers and acquisitions professionals say.

The sale of a company that’s been in a family for decades or generations may come with emotional strings attached. In those instances, cutting a deal requires addressing much more than just financial considerations.

Sellers are often concerned about their legacy and how a buyer will uphold it, said Jeff Helminski, managing director of private equity firm Blackford Capital’s Michigan Prosperity Fund. They often will want to know, for example, what will happen to their employees under the new ownership and whether the buyer will retain the company’s presence and involvement in the community.

“It boils down to what are the goals (and) what are the priorities of the family that owns the business?” Helminski said last week during a panel discussion with winners and finalists of MiBiz’s second-annual M&A Deals and Dealmakers Awards. “What are the things that really matter to them at the end of the day?”

The Michigan Prosperity Fund targets mature manufacturing companies with a high growth potential whose owners want to sell.

John Kerschen, managing director of investment bank and M&A firm Charter Capital Partners in Grand Rapids, urges families that own a business to go through a formal succession or exit planning process with professional advisers. Conducting a “purposeful exercise” enables a company’s owners to identify its characteristics and opportunities and match them with their personal objectives, “and then you start to pursue a transaction that fits those objectives,” Kerschen said.

“Unfortunately, we see a lot of situations that become opportunistic. Somebody happens to call and say ‘are you interested,’ and they get enamored by that but haven’t done the foundational work to understand what really they are trying to accomplish,” he said. “That’s where deals fall apart or bad feelings are created, and that’s not good for anybody.”

When putting together a deal, the buyer of a family-owned business needs to “respect the sensibilities of the people making the decision on the sell side,” said Gordon Lewis, an M&A attorney at Warner Norcross & Judd LLP in Grand Rapids.

“They feel an obligation to more constituencies than just shareholders, and you have to address those constituencies. You have to address what happens to employees (and) you have to address what happens to communities,” Lewis said.

Even as they put together a deal with the buyer, the seller’s emotions can also play into the pace at which a deal comes together.

“Pace is affected by that as people get used to the idea of what they’re doing and (they will) not go faster than the pace they’re willing to proceed,” Lewis said.

MIBIZ 2014 M&A DEALS & DEALMAKERS AWARDS HONOREES

The winners and finalists in the 2014 M&A Deals and Dealmakers Awards presented by MiBiz and the Association for Corporate Growth Western Michigan chapter are:

Best Corporate Deal (More than $100 million)

  • Winner: Perrigo Co. plc acquisition of Elan Corp.
  • Finalist: Spartan Stores Inc. merger with Nash Finch Co.


Best Company Deal ($10 million to $100 million)

  • Winner: Blackford Capital acquisition of Burgaflex
  • Finalist: Gill Industries Inc. acquisition of Grand Rapids Spring & Stamping Inc.


Best Small Company Deal (Less than $10 million)

  • Winner: Kindel Furniture Co. acquisition of Karges Furniture Co.
  • Finalist: Lambert, Edwards & Associates acquisition of Sterling Corp.


Dealmaker of the Year (Buyer/Seller)

  • Winner: Christopher Roop, Perrigo Co. plc
  • Finalist: Greg Williams, Acrisure LLC


Dealmaker of the Year (Adviser)

  • Winner: Gordon Lewis, Warner Norcross & Judd LLP
  • Finalist: John Kerschen, Charter Capital Partners

 

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