Published in Finance
Max Friar, Calder Capital LLC. Max Friar, Calder Capital LLC. COURTESY PHOTO

Friar finds deals aplenty in niche segment of M&A sector

BY Sunday, October 14, 2018 10:46am

FINALIST: DEALMAKER OF THE YEAR, ADVISER

By focusing on the smaller end of the M&A market, Max Friar has sought to expand the deal flow for his Grand Rapids-based advisory firm.

The managing partner at Calder Capital LLC says he’s long thought about moving “upstream” to focus on bigger deals, but his firm continues to explore a largely unfilled niche segment of the industry with smaller, often family-owned businesses.

In many instances, Friar enters the picture shortly after owners realize their children aren’t interested in taking over their companies, forcing them to find a new ownership group for the business. Those situations can make for some difficult conversations, he said.

“We have to be emotionally sensitive at this level,” Friar said of working with small businesses. “I don’t mind. I enjoy the family business. It feels authentic to me.”

Max Friar

Managing Partner at Calder Capital LLC

  • Business description: Mergers and acquisitions firm that represents buyers and sellers of primarily industrial, distribution and service companies throughout Michigan and Indiana
  • Best practices for effective dealmaking: “Timely access to information. Good communication. Momentum to the closing table.”
  • Academic degrees: Bachelor’s degree in international relations, Alma College
  • Personal information: Three children, Jack (11), Max (12), Brenna (16)

Calder Capital typically advises companies with earnings before interest, taxes, depreciation and amortization (EBITDA) between $500,000 and $1 million, Friar said, adding that he sees opportunity to move up from there. He works with businesses both on the buy-side and sell-side.

“We have ambitions up market and down market,” Friar said. “I think … expanding the team with ethical, qualified, hungry advisers is high on my list, but don’t go too quickly. You’ve got to make sure you know who you are getting involved with.”

In 2014, Calder Capital’s first full year of operation, the company completed five transactions, Friar said. So far in 2018, the firm has already completed more than a dozen transactions.

In the 12-month period at the time of this report, Calder Capital had advised on nearly 20 deals, Friar said.

In recognition of Calder Capital’s growing deal volume, tenacity in finding new niches and client service, Friar was named a finalist in the 2018 MiBiz M&A Dealmakers of the Year Awards in the adviser category.

A notable deal this past year for the firm included the acquisition of a suburban Chicago company by Benton Harbor-based Midwest Timer Inc., which had just lost a key customer and needed to find a new line of business to ensure its survival. The acquisition was recognized as a winner in this year’s MiBiz M&A Deals of the Year Awards.

Because of Friar’s passion for working with smaller, closely-held companies, he’s now seeking to take a piece of the company’s practice to a national market. Earlier this year, he launched a spin-off of Calder Capital, Small Business Deal Advisors LLC, which focuses on working with franchise owners.  

As Friar seeks to bolster Calder Capital’s position in the small business and family-owned business M&A market, he notes a handful of emerging trends.

Most sellers are motivated by the amount of cash they’ll be left with once the transaction closes. But while structuring the deal to avoid the need for seller financing or earnouts remains critical for many of his clients, sellers increasingly care about the continuity and legacy of the company they’ve worked to build, Friar said.

“They want to make sure they chose the right buyer because they don’t want the business to crumble,” Friar said. “At the same time, they generally all realize that once they turn the keys over, it is out of their control.”

Family companies selling to outside parties appears to be part of a growing trend, according to the findings of a 2017 survey of family businesses from global consulting firm PricewaterhouseCoopers LLP (PwC).

In 2016, 30 percent of family businesses said they planned to sell to an outside party rather than pass the company on to a family member. That’s up from 12 percent in 2012. Meanwhile, the number of family businesses that plan to pass companies on to a family member continues to decline, according to the PwC survey.

Like any M&A adviser, Friar pays particular attention to macroeconomic trends, especially the slowly rising interest rates and the effect they could have on transaction volume. Thus far, Friar sees the incremental growth in rates of around one quarter of a percent at a time as simply a cost of doing business.

“That’s not going to scare people away,” Friar said. “If you can buy a property that is 20 percent income-producing, who cares if you’ve got a 6-percent interest rate. These buyers will leverage that all day long.”

To that end, Friar doesn’t see anything in the short term that will put an end to the recent flurry of dealmaking activity, particularly given the changing demographics around the country.

“In the niche that we have with Calder and with Small Business Deal Advisors, I don’t see there’s any way — demographically, economically — where we’re any less busy,” he said. “I don’t see how this happens. I know there will probably be more competitors coming into the M&A space because of this large turnover that’s really beginning in earnest.”

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