MiBiz 2017 M+A Deals & Dealmakers Awards Winner: Adviser
While advising on more than two-dozen transactions over a 12-month period, Dustin Daniels saw firsthand the growth of private equity’s role in mergers and acquisitions in West Michigan.
A member of Grand Rapids-based Miller Johnson Snell & Cummiskey PLC and co-chair of the firm’s mergers and acquisitions practice, Daniels said that up to 90 percent of the deals he worked on between July 2016 and June 2017 had some element of private equity.
To Daniels, the winner of this year’s MiBiz Dealmaker of the Year Award in the adviser category, the level of private equity interest in recent years stands in contrast to the activity locally in previous market upswings. It’s a trend driven by the need for PE firms to deploy their vast capital reserves, not some new-found discovery of a pool of potential targets in the region, he said.
“There’s definitely more private equity activity in Grand Rapids than there was previously, but that’s also a reflection of the industry’s evolution,” Daniels said.
He said private equity buyers don’t have the luxury of patience when it comes to putting their capital to work, so they’re doing deals even as the overall market has continued to heat up.
But the expansion in private equity firms’ dry powder and the volume of deals they’re involved with “has grown so much that it’s almost an unfair comparison” to try to liken the current situation to what happened in 2008.
Indeed, patient investors increasingly have sought out private equity as a means of finding positive returns, according to the 2017 Global Private Equity Report from Boston-based Bain & Company Inc., a private equity and management consulting firm.
“With investors everywhere on the hunt for yield, private equity remains a favored asset for institutional investors who have the patience for longer-held bets,” according to the report, which also found private equity returns have significantly outpaced public markets in the short term and long term.
Additionally, Daniels said that private equity deals simply give sellers more options with regards to the future of their companies.
“If you’re going to get acquisitions done, you’ve got to be with private equity,” Daniels said. “So you really see them just wanting to use their resources to grow. That, for a lot of them, means acquisitions.”
LEARNING THE ‘SOFT SKILLS’
Generally speaking, each deal has its own unique attributes, according to Daniels, meaning that it’s difficult to have a specific regimen in place as he approaches every new transaction.
That said, at the onset of every deal, the attorney spends some time focusing on the goals of the various stakeholders involved in the transaction and seeks to draw a map of the high-level attributes that will need to be addressed, such as tax structure.
“There’s a lot of soft skills that go into (it),” Daniels said, referring to how he communicates during the dealmaking process. “I think you just pick those things up.”
Daniels credits an early mentor, M&A attorney Tracy Larsen, now a partner in Grand Rapids at Honigman Miller Schwartz & Cohn LLP, with helping him develop those skills early in his career.
As a mentor to Daniels early on, Larsen said his job was to provide “opportunities for client contact so (he can) grow in the relationship side of the business as well.”
“Law is a service business, and like in any service business, relationships are the lifeblood of an individual’s practice,” Larsen said. “The most important things, frankly, that we have as lawyers are relationships with clients we’re privileged to do work with. That piece of the puzzle is incredibly important.”
Other M&A stakeholders who have worked with Daniels on multiple deals tend to agree.
“The differentiator for Dustin is he just brings a level of modesty and a practical approach to the transaction,” said John Kerschen, president and managing partner of Grand Rapids-based Charter Capital Partners, an investment banking firm. “He builds a trust with clients and respect with the party on the other side.”
Over the last 12 months, Daniels’ deal clients have run the gamut in terms of industry sectors, including everything from family-owned businesses to health care providers.
For example, Daniels advised medical device maker Motion Dynamics Corp. in a deal that provided the Fruitport-based company an undisclosed amount of growth capital from Vance Street Capital LLC. The Los Angeles-based PE firm acquired a majority stake in the company, but Motion Dynamics’ original family owners still maintain significant stakes and work in the business, Daniels said.
“It was more of a partnership … than a true sale,” Daniels said. “(Owner Chris Witham) wanted Motion to be able to be a growth engine for creating jobs in the lakeshore area. The size the businesses have grown to, and just the capital necessary to continue to grow the business at that rate, he needed a partner.”
Daniels also represented Grand Rapids Ophthalmology in its sale to Sterling Partners, a Chicago-based private equity firm. While no terms of the deal were disclosed, the PE-backed investment will allow the practice to expand across the state and the broader Midwest market, as MiBiz previously reported. The deal was a finalist in the MiBiz M&A Deal of the Year Awards in the $25 million to $150 million category.
“I know one of the reasons why Sterling Partners are so excited about that is they had a lot of faith in the fact that they were buying a good practice because the doctors were hard working,” Daniels said. “The business is made up of good people. When you’re making an investment in medical services like that or an eye care business, really your people are what you’re investing in. That’s just one example of why (Sterling Partners) was so excited about it. They view West Michigan as having those quality traits that would make a service business be successful.”
DRY POWDER AHEAD
While the MiBiz Dealmaker of the Year Award recognizes Daniels personally, he’s quick to point out that as Miller Johnson’s M&A practice has grown in recent years, deals increasingly have become a team sport.
“I think the thing we’ve always said about the group is we have a good culture — a good, hard-working culture where we work well together and we have as much fun as possible doing this,” Daniels said. “And I think everyone enjoys working with each other and advancing the common goal.”
Daniels pegged the firm’s M&A transaction volume over the last year at around $1 billion.
There’s reason to believe that despite deals getting harder to find, PE firms will continue to be active, Daniels said. It’s an observation supported by the Bain report, which found that at the end of 2016, PE firms globally had $1.47 trillion in undeployed capital.
More locally, Daniels and his colleagues at Miller Johnson are working on another 12 to 15 deals that could close in the coming months.
While acknowledging the cyclical nature of the M&A sector, Daniels said few indicators suggest the wave of current deals will come to an end anytime soon.
“The pipeline of transactions we have is as strong as it’s ever been for us,” Daniels said. “The cycle seems very strong now, and it’s been strong for a while, and at some point it seems like that’s going to change. I couldn’t tell you what exactly is going to change. But I think it’ll be driven largely by confidence and credit availability, which go hand in hand.”