Buying or selling a business or putting together a major deal is not the time to get cheap.
That’s according to the winners and finalists in the 2016 MiBiz M&A Deals and Dealmakers of the Year Awards who said getting a deal done hinges on assembling a good team of legal and financial advisers that can guide buyers and sellers through the process.
“You get what you pay for (with advisers),” said Ryan Mast, president of Bloem LLC, a Hudsonville-based manufacturer of planters and outdoor products that in January acquired American Designer Pottery, a division of Fiskars Brands Inc.
The acquisition won a 2016 Deal of the Year Award for transactions of less than $25 million.
“I really think we had the best group of outside advisers I’d ever worked with, and they really brought a level of expertise to the table that was fantastic,” Mast said.
Winners and finalists in the MiBiz M&A Deals and Dealmakers of the Year Awards offered their views in separate interviews on the best practices they use to put together successful transactions.
Service Express Inc. CFO Kraig Harper said having the right advisers on board as you enter the process of crafting a transaction remains critical.
“As you outline your needs and wants, do they really hear you and lead with those things, or do they try to tell you how it should be instead of what you want out of it?” Harper said.
Service Express, a third-party provider of maintenance services for data center infrastructure, sold to Pamlico Capital last year in a transaction that was selected as the finalist in the Deal of the Year category for transactions of more than $150 million.
Along with having the right teams of legal and financial advisers, executives also need to communicate clearly with employees about what’s occurring, said Crystal Flash Inc. CEO Tom Olive.
The Grand Rapids-based distributor of propane, fuel oil and other fuels throughout Michigan’s Lower Peninsula transitioned in 2016 to an employee-owned company through an employee stock ownership plan. The transaction was named a Deal of the Year in the $25 million to $150 million category.
“We saw how important it is to be very communicative with the team and help them to understand what this is, what it isn’t, how it does and doesn’t work, and how they can create value for the company and them at large,” Olive said.
Any transaction — whether a sale, acquisition or securing capital for growth — also starts with an honest assessment of the business and potential partners.
If not, owners run the risk of potential problems down the line.
“You have to be brutally honest about your business,” said Mark Sellers, the founder of Grand Rapids-based BarFly Ventures LLC, which operates the expanding HopCat craft beer and restaurant concept around the Midwest.
BarFly Ventures received the 2016 Growth Capital Award from the Western Michigan chapter of the Association for Corporate Growth for securing $25 million in growth capital from two mezzanine lenders.
“What I mean by that is, if you’re not brutally honest with yourself, the capital raise and the investors will ferret it out,” Sellers said. “They’ll look in every nook and cranny. You can’t hide things when you’re trying to raise capital. They’ll find it. They ask for everything, every little detail of our financials.”
Bottom line: Sellers of a business can’t hide anything from potential buyers, said Jim Engen, the founder and former majority owner of Netech Corp. that was sold early this year to New York-based Presidio Holdings Inc.
The sale of Netech, an information technology services provider, won Deal of the Year for transactions of more than $150 million.
“It starts out with being very upfront about your finances, about your inventory. Just having a clean, well-run company to begin with is going to pay dividends in the future,” Engen said, noting owners need to be “very forthright about who you are and what you are.”
Martin Stein, the managing partner of Grand Rapids private equity firm Blackford Capital, said that successfully putting a deal together “first and foremost” requires everyone “to be able to look at things from the other person’s perspective.”
Blackford Capital was a finalist for Deal of the Year for transactions between $25 million and $150 million for its acquisition of Hudsonville-based Grand Equipment, which sells, leases and repairs new and used heavy construction equipment.
Just as you would conduct due diligence on the company you’re buying or selling to, you want to know as much about the ownership behind the company, Stein said.
“Do your homework and know who you’re partnering with,” Stein said. “As I’ve said before, you can’t do a good deal with a bad person, and so we feel we are really fortunate to be working with an excellent partner in Grand Equipment (and founder Jeff Grasman).”
Tips for effective dealmaking: Every transaction may be different, but the winners and finalists in the MiBiz M&A Deals and Dealmakers of the Year Awards offered several key best practices they’ve learned over the years that have helped get deals over the finish line.
LEGACY MATTERS: “Honoring the legacy of the owner is critical,” said Philip Blanchard, partner at Tillerman & Co., a finalist in the Deal of the Year Awards for transactions of less than $25 million. Tillerman & Co. acquired aerospace components manufacturer Jackson Flexible Products Inc., whose founders wanted to retire and pass the company to someone who would maintain the operations and the employee base in Jackson, Mich. “Where there seems to be a vacuum in the market is money willing to appreciate the legacy of the owner. To many of these people, that company is like a family member. They probably spent more time with it than they did with their children or their spouse. It’s not just a financial decision, it’s an emotional decision.”
STAY FLEXIBLE: In buying and selling companies, it’s important for both sides to maintain a flexibility when dealing with the challenges that will inevitably arise, said David DeBoer, CEO of Burke Porter Group, who won the Dealmaker of the Year Award in the executive category. “It seems like people don’t always want to take the risk of making a decision,” DeBoer said. “Sometimes, you just have to say, ‘OK, I know that, we’re still going to move forward, here are the terms of the deal.’ Other times, you just call up the other side and say, ‘This is not what was advertised. We can either adjust or we’re going to end.’ You never fall in love with (the deal).”
REMAIN AHEAD OF THE CURVE: “I’m a firm believer that if you’re reading about something in the press, you’re too late,” said Mike VanGessel, CEO of Rockford Construction Company Inc., who was a finalist for the Dealmaker of the Year Award in the executive category. “You have to invest in getting to know people. You have to invest in community. You have to study trend lines and know where the puck is going. … For our model, given that we don’t do anything that’s very cookie-cutter, we have to be thoughtful of how we put things together. … Don’t be selfish. Don’t be greedy. You need to make sure it’s a good deal for everyone.”
KNOWLEDGE IS POWER: When attorney Michael Jones works on a deal, he takes the time to really dive into his client’s motivations and the details of their operations. “Effective dealmaking requires knowledge of what the client is trying to do and what is important so you can give on points that aren’t important and come up with strategies to win on the important issues,” said Jones, a partner at Warner Norcross & Judd LLP and winner of the Dealmaker of the Year Award in the adviser category. “While this involves some upfront learning about the transaction, in the long run, it will make the transaction go faster and will likely lead to a better result for the client.”
CRUNCH THE NUMBERS: M&A attorney Tracy Larsen, a partner at Barnes & Thornburg LLP in Grand Rapids, notes that lawyers need to think beyond the legal world to really serve their clients involved in transactions. Most often, that means using good business acumen to understand the inner workings of a deal. “Many lawyers shy away from the financials,” said Larsen, the finalist in the adviser category of the Dealmakers of the Year Awards. “We delve into those, which brings better values. We just have some incredible resources located around the country that we can bring in that you just won’t find in a local firm.”