GRAND RAPIDS — Attorneys working in the field of M&A like to say that there’s a story behind every transaction.
That notion was on full display at last night’s MiBiz M&A Deals and Dealmakers of the Year Awards held at the Studio D2D in Grand Rapids. A common theme among the winners and finalists was a desire to preserve the culture of a company created by the sellers, even as the firm went through the transaction process.
Speaking during a best practices panel discussion, several event winners discussed how they sought to ensure that their company culture would remain intact. Often, that meant taking an “altruistic” view of the deals by compromising on deal multiples — and giving up millions of dollars in value — to ensure that they had the correct buyer.
“We really got to know our employees, not just have them be a number,” said Jim Engen, former owner of Netech Corp., the winner of Deal of the Year Award for a transaction greater than $150 million.
Netech Corp. sold earlier this year to New York City-based private equity firm Presidio Holdings Inc.
“Those people were very dear to us and when we left, we shared in the wealth,” Engen said. “We gave them millions of dollars in bonuses and they deserved it. They probably deserved it more than I did. I was just the guy who knew how to hire smart people.”
A somewhat similar scenario played out in the sale of Crystal Flash Inc. to its 250 employees in an employee stock ownership plan (ESOP). The deal, which won the Deal of the Year category for transactions between $25 million and $150 million, allowed former owner Tom Fehsenfeld to secure a fair price for the company while also taking advantage of the generous tax offerings inherent in an ESOP.
“We looked at possibly joining up with a family office or a PE firm,” Fehsenfeld said. “We didn’t feel like that strategy would work with an acquisition by a major company. This idea of the ESOP just kept coming back up because it really hit all the different things that we were trying to do in terms of opportunity for people in the company, in terms of fulfilling strategy, and having a great payday for the family as we exited.”
Additionally, Bloem LLC won in the less than $25 million transaction category for its acquisition of the American Designer Pottery business from Fiskars.
The executives reported a robust M&A market continues, a perspective affirmed by recent market surveys. Global business consulting firm Baker & McKenzie expects global M&A activity to remain strong through 2018, with transaction activity growing 2.9 percent over the next two years, bolstered particularly by favorable monetary policy and lower oil prices.
Should the favorable business climate continue, experts suggest that sellers going through the M&A process for the first time need to practice strict due diligence to ensure they’re prepared for prospective buyers kicking the tires on their companies.
“That does two things: It makes it less likely that there’s a purchase price haircut and it will make the transaction go smoother and more likely to close,” said Michael Jones, a partner with law firm Warner Norcross & Judd LLP, this year’s Dealmaker of the Year winner in the adviser category. “It’s a critical piece and it definitely helps out if you do self due diligence before starting the transaction.”
Here are stories about each of the winners and finalists in this years M&A Deals and Dealmakers of the Year Awards, as well as the Association for Corporate Growth Western Michigan Chapter’s ACG Growth Capital Award.
ACG Growth Capital Awards
Winner: BarFly Ventures LLC