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Mark A. Filippell

Dealmaking is all about understanding the motivations driving the transaction

Mark Filippell

November 2, 2018

By: Mark Scott

Mark A. Filippell was just entering his 30s when he closed a transaction that would serve as a career-defining moment for many dealmakers.

He was an executive with Comau Spa, Italy’s leading factory automation company. The company was jointly owned by Fiat and Bendix, but after Bendix got bought, its new parent company wanted to get out of the machine tool business. That was their decision to make, of course, but Filippell shuddered at the deal in place to get Bendix out of Comau.

“They are going to take 35 cents on the dollar and I reached upstairs with Allied, who had taken over Bendix,” Filippell says. “I said, ‘It’s a big mistake. We can do much better and here’s why.’ They started listening and pretty soon, they said, ‘We’re working through you from now on. Forget the organization chart, you’re our guy. Get us out of this thing.’ Within a month or so, we had gotten the framework of a deal done. We got full value. After that, I took a few weeks off, saw Europe some more, then came home and said, ‘What am I going to do now?’”

When Filippell returned to Cleveland, he learned that McDonald & Co. had taken note of his work in Italy and he was invited to join its M&A practice. Dealmaking was never an aspiration for the Harvard Business School graduate. But through his time at McDonald & Co., KeyBanc Capital Markets and now as a founding partner and managing director at Western Reserve Partners, he’s become quite good at it. He even wrote a book, “Mergers & Acquisitions Playbook: Lessons from the Middle-Market Trenches,” published by John Wiley & Sons Inc. in 2011.

“I’ve done 130 M&A deals and every deal is different,” Filippell says. “Even though we do a lot of negotiating, I really like the marketing part of dealmaking. I like getting into the company and really understanding what they do. It’s not just numbers. It’s what’s underneath the numbers and then figuring out how to present that in the best possible way.”

In this week’s Master Dealmakers, Filippell talks about important points to consider before you put your company on the market and a pivotal moment for Western Reserve Partners.

Tips on selling a business

A real popular thing today for M&A firms is to say, ‘We’re going to do a thorough job and show your company to 250 people.’ That almost universally is not in the best interest of the client. It’s great advertising for the investment banking firm, who is making friends all over. But it’s not in the client’s interest. I just cringe when people say that. You’re trying to find synergy with the buyer. You’re trying to find the right people. You’re trying to keep things confidential. When there are so many people, you can’t control it and all that goes out the window.

Sometimes there is one buyer that makes sense. In other cases, you need to look at more. The key is to understand the company and figure out the right path for that business. This idea that it’s a cookie-cutter approach and this is how you sell a company, that’s like trying to make a pair of shoes without knowing how big the person’s feet are or what the shoes are going to be used for. Every deal we do is a custom thought and it starts with understanding what that company does and why the owner wants to sell.

The time to think about why you want to sell is ahead of time. Don’t think about it during the process or during closing. Think about what you really want. Do you want liquidity? Do you just want out? Do you want to spend more time with your family? If you don’t want to let the business go and you just want to spend time with your family, why don’t you just hire a president and have him or her run the business? You can go in a day or two a week. They’ll run it, pay them well and the business can grow. Think about what you really want ahead of time. A lot of people don’t do that and it’s really frustrating.

The story of Western Reserve Partners

We signed the incorporation papers on July 4, 2004. We got our core team of Ralph Della Ratta, myself and Dave Dunstan. We had built up the firm and gone from a dozen people when we started to like 34. Do we get a lot bigger and go up to 50? Do we work on bigger deals? We didn’t have capital to speak of. We’re doing it all with brains and contacts and things. But the phone started ringing and we got proposals from a number of banks and a couple accounting firms to buy us.

We got calls from a number of banks and they kept wanting to homogenize us into the bank. ‘You’ll join our so-and-so group and be the Cleveland office.’ Nothing felt right. Then the Citizens Bank people talked to us and it really clicked. They had been part of Royal Bank of Scotland, but had spun off and now they were independent. It was a good-sized bank, a $155 billion bank largely focused on the middle market. For an odd set of reasons, they had virtually no M&A capability. When they finally got the OK from the Federal Reserve to add M&A, they said, ‘We want you. We scoured the country and we want Western Reserve Partners. We like your culture, we like your know-how and we like your people.’ And we liked them too. We actually turned down a higher offer because we wanted to work with the people we wanted to work with.

If you’re going to stay with the business after the sale and if it’s your home and your love and you’re going to be there, you don’t have to take the highest price. If it’s a publicly traded company and it’s just dollars to dollars, the board has to take the highest price. But with a private company, that’s not so at all. You can say I just like these people better. I think they are going to honor our values better. There’s an old saying that people who marry for money pay for it. People who sell their company for the absolute last dollar and go with the wrong party, they pay for it too. We picked the right people.

The Last Word

I thought I’d be a securities lawyer or a bankruptcy lawyer. I worked in a law firm in Indianapolis and I think I looked at the clock 100 times a day. Lawyers, God bless them. Most of what lawyers do is protect against what can go wrong. I’m much more interested in what can go right. I just don’t get as excited about everything that can go wrong. Let’s know it, let’s protect against it. But let’s think about what can go right.