GRAND RAPIDS — Partners in a new investment bank and M&A advisory firm in Grand Rapids are targeting opportunities in what they see as an underserved segment in the lower end of the
middle market.
David Lefere and Mike Mills formed LaGrey LLC through a partnership with Grand Rapids-based Charter Capital Partners, which holds a minority stake in the new firm.
Representing primarily sellers, LaGrey targets clients with annual EBITDA (earnings before interest, taxes, depreciation and amortization) from $500,000 to $3 million, and deals with a transaction value of up to $20 million. The firm’s sweet spot is deals valued at $7 million to $12 million.
As Charter Capital Partners moves up market to do bigger deals, Lefere and Mills were presented with an opportunity to partner with the firm to serve companies on the lower end of the middle market through LaGrey.
“It was Charter’s view, and our view anecdotally, that advisory services for these sized companies don’t necessarily exist in the form that Charter wanted to see from a referral standpoint for clients and for their referral sources,” Mills said. “They found an opportunity to say, ‘Hey, we can still keep these if we have another company that we’re affiliated with or partnered with that takes on these deals.’”
Kerschen told MiBiz that LaGrey “is a resource for our investment banking team to refer clients that do not fit our practice at Charter.” The partners at LaGrey have deep experience both as business owners who have sold their companies and as professional advisers to privately held business owners, Kershcen said.
“LaGrey will bring an emphasis on providing in-depth advisory services to their clients that just are not provided by high volume, marketing oriented business brokerage firms. From our experience, the sale of a privately held business is a major life decision for its owners and has tremendous financial implications for them and their families,” he wrote in an email to MiBiz. “They deserve an experienced and dedicated advisor that will truly dig in to understand their business and its value in the market.”
Both Mills and Lefere have more than 40 years of combined experience as advisers who also have owned, operated and sold companies in the lower end of the middle market.
Lefere is an attorney who practiced for 20 years, including 10 years exclusively doing M&A work for lower middle market clients. He acquired a company in early 2020, ran it for two years, and then exited in early 2022 with a sale.
As he weighed what to do next, Lefere met with John Kerschen, the founder and managing partner at Charter Capital Partners who he’s known for years. They talked about an idea Kerschen was putting together with Mills for a new firm to focus on the lower middle market through a strategic partnership with Charter.
Kerschen introduced Lefere to Mills, who was working for Charter at the time and has a finance background and has bought, operated and sold companies.
As the two started talking, “we hit it off and liked our backgrounds,” Mills said.
Experience working in the lower middle market gives the two partners a deeper understanding of the market and what their clients are experiencing as they approach their own sale and exit, Lefere said. That firsthand knowledge can serve as a market differentiator for LaGrey, he said.
“It is an area that we are intimately familiar with and very, very comfortable with. When we sit down with these lower middle market companies and these owners, Mike and I have been there,” Lefere said. “We’ve owned those companies, we’ve operated these companies, we know their struggles.”
In working with lower middle market clients, LaGrey wants to “take a step further beyond introducing buyers and sellers. It’s digging in a little bit deeper, it’s walking alongside our clients and being there every step of the way to have impact on the value that … they’re able to extrapolate from the transaction, but also minimize the business disruption while all of this is going on,” Mills said.
In some instances, LaGrey may go beyond providing M&A advisory services to clients. The firm also could invest in or take on an operating role, Mills said.
“We think there’s a lot of opportunity for that in West Michigan and that’s something that, frankly, differentiates us from just a pure brokerage,” he said.
The firm’s early deal flow is “pretty good,” although “discussions are just a little bit different with rising interest rates that make financing a deal cost a little more,” Lefere said. Still, he expects M&A activity to do well in 2023.
“I think everyone had the idea that 2023 is going to continue to be better than 2022,” Lefere said. “We’ve overcome in the market the fear that we’re going to fall off a cliff. I think everyone is starting to realize this is going to settle down. It’s a little bit of a new norm, and so deal flow seems to be positive right now and I would say by the middle or end of 2023 picks up even more.”
