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In the broader M&A market, news of mega deals hitting the headlines is signaling that companies are aggressively pursuing acquisitions with transaction activity reflecting a mix of corporate and private equity buyers and diverse industries. Deal value in February was up more than twofold from January levels with Heinz, Dell and Virgin Media among the billion-dollar-plus deals.

Local corporate buyers are also flexing their muscle. If February transaction activity is any indicator, momentum is building for what is expected to be an active year for M&A in 2013.

An M&A highlight in the health care arena, Cincinnati’s Catholic Health Partners Inc. announced a strategic partnership with Summa Health System Inc. of Akron, whereby it will acquire a minority ownership stake in the health care provider. The move is reflective of the broader consolidation trend taking place in hospitals and health systems in anticipation of changes from health care reform. Summa announced last July that it was seeking a potential partner as part of a three-year strategic planning process.

The combination brings together two regional leaders and expands CHP’s market share. With $5.6 billion in assets, CHP operates more than 100 health facilities, including 24 hospitals throughout Ohio and Kentucky, and is the largest health system in Ohio. CHP reported $3.8 billion in net operating revenue in 2012.

In a highlight for the industrial market, Beachwood, Ohio-based private equity firm Rockwood Equity Partners completed the acquisition of TIM-CO (aka CAL-RF Inc.), its first strategic add-on for portfolio company Astrex Electronics, which it acquired in 2008. TIM-CO is a distributor of electrical and electronic components and value-added assembler of coaxial connectors and cable assemblies with a focus on the commercial aviation, space, oil and gas, industrial, and military markets.

Also in the industrial segment, Timken Co. announced its second acquisition this year with Roller Bearing Industries Inc. Roller Bearing manufactures balls and roller bearings for the railway and automotive industries. Timken purchased the company from The Greenbriar Cos. Inc.

 

Deal of the Month

The health care industry garners the spotlight this month with the announced $2.1 billion acquisition by Cardinal Health of AssuraMed Holding Inc. of Twinsburg. AssuraMed distributes disposable medical products for the home health market, with a product range than spans more than 30,000 SKUs from ostomy, diabetic and respiratory supplies to wound care and insulin infusion products.

The acquisition gives Cardinal Health an entry into the growing home health market, adding an estimated $1 billion to the top line. The company estimates synergies from the combination to reach $50 million by 2016. Cardinal Health reported EBITDA of $2.3 billion on revenue of $104.8 billion in 2012.

AssuraMed is backed by private equity firms Clayton, Dubilier & Rice and GS Capital Partners, which acquired the company in 2010. During their ownership AssuraMed completed the acquisition of Invacare Supply Group, the domestic medical supplies business of Invacare, in a $150 million transaction.

 

Andrew Petryk is managing director and principal of Brown Gibbons Lang & Co. LLC, an investment bank serving the middle market. Contact him at (216) 920-6613 or apetryk@bglco.com

Published in Cleveland

There is little argument that entrepreneurs are a unique breed in the business world.

They see opportunities where others do not. They take calculated risks that give other business leaders pause. And they refuse to accept failure as an option.

Each year, when Ernst & Young presents its U.S. Entrepreneur Of The Year program across 26 regions nationwide, it searches for the top entrepreneurs who are moving the needle. These are people leading organizations that are scalable, innovative and, in many cases, groundbreaking.

In a study of the 636 companies that were named finalists in the 2012 program, numerous commonalities came to light. The following are three that Ernst & Young identified.

 

Entrepreneurs embrace innovation.

Innovation comes from trying different things — often accepting failure as just another outcome of embracing change and new ideas. Successful entrepreneurs are agile and know it. They look for ways to attempt new ways of doing old things.

And while 21 percent of last year’s finalists were in the technology sector, that doesn’t mean innovation is the exclusive domain of those firms. In fact, those entrepreneurs who innovate products, services and solutions have been just as successful as technology firms when it comes to innovation and changing the way everyone looks at specific industry sectors.

 

Entrepreneurs demonstrate

unrelenting resilience.

When you refuse to accept the word “no” as an option, you’re on your way toward achieving successful results. Entrepreneurs understand that setbacks occur as part of the normal process of growth. They are nimble enough to change tactics, rebound quickly in the face of adversity, as well as redefine their strategy if they see it’s not going to work. Most important, entrepreneurs do not focus on the failures. They learn from the mistakes, adapt and then move on to try new things.

 

Entrepreneurs effectively

communicate vision and instill

passion within their teams.

Ask any entrepreneur where the ultimate key to his or her success lies, and he or she will point to his or her team of managers and employees. The entrepreneurs will further explain that by communicating their vision to this group, they’ve been able to inspire them and instill a sense of passion to achieve success. Savvy entrepreneurs recognize that when you get everyone rowing in the same direction, it’s hard to stop an organization’s progress. l

You can find more commonalities identified by Ernst & Young at www.ey.com. Nominations for this year’s program will be accepted through

late March/early April and can be downloaded by visiting www.ey.com/us/eoy.

 

The 636 companies that were finalists of the Ernst & Young U.S. Entrepreneur Of The Year 2012 Award defied the recession between 2009 and 2011. Here’s how:

 

Jobs

  • They employ in excess of 700,000 people.
  • They experienced collective job growth of 30 percent compared with 1 percent in the overall U.S. economy.
  • This translated to 150,000 new jobs during that time period, with the average finalist’s workforce at 1,060 people.

Revenue

  • Finalists experienced revenue growth of 48 percent compared with 6 percent for the average U.S. company.
  • They generated $165 billion in revenue in 2011, a 26 percent jump from 2010.
  • Median revenue per company  was $44 million in 2011.

Published in National

Decent bosses typically try to lead by example. As a leader, you must model appropriate behavior to promote the greater good and to send a constant message with teeth in it.

The French term “esprit de corps” is used to express a sense of unity, common interest and purpose, as developed among associates in a task, cause or enterprise. Sports teams and the military adopt the sometimes-overused cliché, “One for all and all for one.” “Semper Fi” is the Marine Corps’ motto for “always faithful.” We commonly hear, “We’re only as strong as our weakest link.”

However, the real test of team-building and motivational sayings is that they are good only when they move from an HR/PR catchphrase to a way of doing business — every day.

As soon as you put two or more people in the same room, a whole new set of factors comes into play, including jealousy, illogical pettiness and one-upmanship, all of which can lead to conflicts that obstruct the goals at hand. Certainly, much of this is caused by runaway egos. Perhaps a little bit of it is biological, but most of it is fueled by poor leadership. Everyone has his or her own objective and it’s the boss’s responsibility to know how to funnel diverse personal goals in order to keep everyone on track. This prevents employees from straying from the target and helps avoid major derailments. Essentially, it all gets down to the boss leading by example with a firm hand, understanding people’s motives and a lot of practicing “Do as I say and as I really do myself.”

Communicating by one’s actions can be very powerful. A good method to set the right tone is stepping in and lending a hand, sometimes in unexpected and dramatic ways. This shows the team that you govern yourself as you expect each of them to govern their own behavior. In my enterprises, I constantly tell my colleagues that the title following each person’s name boils down to these three critical words: “Whatever it takes.” Certainly, I bestow prefixes to this one-size-fits-all, three-word title, such as vice president or manager, but I consider these as window dressing only.

After speeches, when I explain this universal job description, I always get questions from the audience about how I communicate this concept. I follow with a real-life experience that played out in the first few months after I started OfficeMax. As a new company, we had precious, little money, never enough time and only so much energy, which we preserved as our most valuable assets in order to be able to continually fight another day.

In those early days, too frequently, I would see what looked like a plumber come into the office, go into the restroom and emerge a few minutes later presenting what I surmised to be a bill to our controller. I knew whatever he was doing was costing us money and probably not building value. The third time he showed up, in as many weeks, I immediately followed him into the restroom (much to his shock and consternation). I asked him what in the world kept bringing him back. He then proceeded to remove the john’s lid and give me a tutorial on how to bend the float ball for it to function properly. That was the last time anyone ever saw this earnest workman on our premises. Instead, after making known my newly acquired skill, whenever the toilet stopped working, I became the go-to guy.

This became an object lesson to my team about how to save money. At that time, 50 bucks a pop was a fortune to us. It got down to people knowing that all of us in this nascent start-up were expected to live up to their real, three-word title. This was our version of how to build esprit de corps. Others began boastfully relaying their own unique “whatever it takes” actions, and it became our way of doing business.

The lesson I learned in those early days was that it wasn’t always what I said that was important but rather what I did that made an indelible impression. A leader’s actions, with emphasis on the occasionally unorthodox to make them memorable, are the ingredients that contribute to molding a company’s culture.

Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at mfeuer@max-wellness.com.

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Published in Akron/Canton

For Chuck Shive, coming to Mikesell’s Snack Foods Co. was an opportunity to get into a different industry and utilize his background to make a difference. He entered Mikesell’s as the executive vice president of marketing, looking to upgrade a more than 100-year-old potato chip brand.

Not long after Shive started, the company’s CEO, David Ray, retired and Shive made the leap to president and CEO in May 2012, becoming only the fourth CEO in history of the company, a 180-employee organization with annual revenues of more than $40 million.

Once he was in the top spot, he turned his attention to building on the company’s strengths while also taking the opportunity to rebrand outdated packaging and also introduced new flavors of chips.

“It was an opportunity to take the equities that the brand has and build on those,” Shive says. “We didn’t want to touch the quality of the product, because in 100 years we’ve learned how to make it pretty well over here, but we wanted to take a look at the packaging and differentiate it and emphasize our premium product.”

While Shive and his team at Mikesell’s believe they have the best chip in the marketplace, the branding and packaging didn’t reflect that. Shive set out to make some overdue changes and upgrades.

“The keys were building on the strengths that we do have, but also looking at the challenges and opportunities going forward and being willing to address those rather quickly so we could establish our new strategic direction going forward and get that in front of our employees and in front of our partners and make sure it was a dynamic transition as it was happening,” Shive says.

Here is how Shive combined company strengths with new ideas to improve a more than 100-year-old brand.

Find your direction

Undertaking a challenge such as rebranding a company, not to mention one with a rich history, is a daunting task. Shive had to make sure he did his due diligence before moving forward with ideas.

“You have to ask a lot of questions,” Shive says. “Ask a lot of questions with your team, with your employees and with your suppliers. How do they view the company? How do they see the strengths and weaknesses of the company? What are the opportunities going forward? What are the great ideas?”

Mikesell’s received a lot of ideas from its employees over the past year and especially since Shive has been in charge. The company executes on the ideas that make sense and will move the business forward.

“There’s a lot of good institutional knowledge among partners and employees that all you have to do is ask and they’re willing to share that information and ideas,” he says.

Sitting in the CEO chair, Shive had his own ideas about where he wanted to lead the company.

“There are a lot of opportunities out there and some are opportunities that make sense for you and some don’t,” he says. “You’re going to understand that as you move forward and move through the planning process and strategy development process and then the execution around that strategy.”

While Shive had his own ideas about direction, that doesn’t mean he ignored others’ input in the decision process.

“It is a balance,” he says. “You strategically have an idea of where you want to go and through asking a lot of good questions and getting a lot of good feedback and working with your executive team and others, you refine that strategy based on what is realistic to expect and execute going forward.

“At the same time if you believe in your strategy, your team and employees, and the company understands what that strategy is and you’ve communicated it well enough, then it becomes time to implement it and execute it.”

Define your brand

To execute on the direction Shive wanted to take the company moving forward, he sat down and discussed how they wanted the new branding to look and what the challenges and opportunities would be.

“We basically took an overall review of our branding as a company, our branding on our packaging and what the strong points were that we wanted to keep and what we thought we could do better with going forward,” Shive says. “Some of the key equities of the brand and packaging that we have is, No. 1, our name.

“Mikesells is an iconic brand for this region, so we didn’t want to touch that to any degree, but we wanted to refresh the small town feel that we have.”

Mikesell’s old packaging as well as some of its competitor’s old packaging was what Shive calls “old foil cartoon-looking packaging.” Mikesell’s made subtle switches such as moving from a foil bag to a matte-finish bag, which gave the product a much more premium look and feel in the marketplace.

The company also cleaned up some of its messaging that has appeared on the packaging since 1910. The slogan changed from, ‘They are delicious’ to ‘Creating delicious since 1910.’

“We went through that process and some consumer testing and reviewing with the steps along the way to make sure we were making the right moves and that consumers were delighted by the new packaging we were coming out with,” he says. “Then it just became the process of implementing that with our packaging partners to bring the new branding to life on the new bags.”

The company also took the opportunity to find what differentiates Mikesell’s from its competitors in the snack food arena.

“It’s not our packaging, it’s our product, but with our old packaging you really didn’t get a look and feel of what our product was,” Shive says. “You didn’t see the actual appetite appeal that our product has, so we wanted to emphasize that on the new packaging moving forward.”

Mikesell’s strength was its product and the rebranding of its packaging helped to emphasize how good the product really was.

“A lot of people may look at a brand change as an opportunity to correct weaknesses, but for us we look at it as an opportunity to build on the strengths that we have,” he says. “That’s a more proactive than reactive approach to take to it.”

Building on those strengths allowed Shive and Mikesell’s to develop a newer brand that will help push the company forward for many years.

“It’s about getting to an area that you’re really comfortable with that you’ve kept the soul of the brand and enhanced it to where it meets what you’re looking for going forward,” he says. “It’s not a quick fix. Our point of rebranding and upgrading our packaging was not so we could do it every couple of years.”

Add new products

Once the new branding had been put in place, Shive kept busy last summer by also adding new products to the company’s line of potato chips. Mikesell’s introduced a sweet chili and sour cream flavor and a Tuscan spice flavor.

“We wanted to put flavors in there that matched consumer wants and desires,” Shive says. “These are the first new flavors we’ve added in more than five years. We’re constantly reviewing what our offerings are and whether we see any need for new products out there.”

Mikesell’s is always consulting its employees, consumer feedback and its partners to help drive new product decisions.

“We get to try new flavors constantly,” he says. “We take them through a process where we rank them versus existing flavors or rank them on the taste qualities and expectations of a particular flavor going forward.

“If we have a particular item out there where it doesn’t seem like we made the right decision for what the consumer was looking for, then we’ll look at moving that out and replacing it with a new flavor or new offering.”

One of the reasons Mikesell’s released these two new flavors was because it had been a while since the company had new offerings out in the market.

“By the nature of the business, consumers are looking for new, different flavors and we’re making a conscious effort to be a little more responsive to that,” Shive says.

Releasing new products that make an immediate impact is a game of hit or miss.

“You want to do all of your due diligence and define what that product is going to be based on robust consumer and market research,” he says. “Then you have to follow through with it and be prepared to support it when you bring it out.

“A lot of people want every single item or product that they introduce to be a home run and that’s just not going to happen. You have to go in knowing that and expecting that. You take the learning’s from that, and you apply them to the next one.”

How to reach: Mikesell’s Snack Foods Co., (937) 228-9400 or www.mike-sells.com

Takeaways

Gather input for any new direction of your business.

Build on strengths, don’t correct weaknesses.

Do consumer and market research surrounding new product releases.

The Shive File

Chuck Shive

President and CEO

Mikesell’s Snack Foods Co.

Born: Vicksburg, Miss.

Education: Graduated from the University of Southern Mississippi with a B.S. in business administration

Sports: He was a pitcher at Southern Miss from 1987-89. He was drafted by the Philadelphia Phillies and spent one year in their minor league system. “All I ever wanted to do was be a professional baseball player, and I got to do it for a little bit.”

What was your very first job, and what did you learn from that experience?

One of my first jobs was working in a production plant on a production line grabbing containers of pesticides and sticking them into boxes for eight hours a day. What I learned was in that line, nobody is independent from anybody else. In what is considered a basic menial job, you’re still dependent on the guy to your right and the guy to your left to make sure that the line ran correctly.

From the earliest job that you could have, even to the role I’m in now, you’re still reliant on interactions with other people.

What is the best business advice you’ve ever received?

None of us is smarter than all of us collectively. The collective wisdom of a group outshines any individual wisdom.

What is your favorite Mikesell’s product?

It’s tough to pick among them, but I’m a big fan of the new sweet chili and sour cream chips. A close second would be our bold Bahama barbecue kettle chips. I like spice and flavor.

What are you most excited for about the future of the company?

Where we are today there’s still so many growth opportunities out there that we haven’t tapped and putting our strategy in motion to go out and attack those growth opportunities is what gets me going every day.

Published in Cincinnati
Thursday, 28 February 2013 19:00

Donna Rae Smith: Face your fear

Growing up, I was terrified of heights. To cope with my fear, I did what many people do: I avoided it. The funny thing about avoidance is that, while it sounds like a passive tactic and an easy way out, it actually requires energy.

I would plan ways to avoid being confronted with heights. Eventually, I had enough of avoidance. I decided that I wanted to confront my fear. So I booked a trip to the most challenging place I could think of: the Grand Canyon.

It would have been terrifying enough to stand at an observation point and peer down into the canyon. But that wasn’t my plan. I was going for broke. I was going to descend into the canyon on foot.

 

One step at a time

That slow descent into the Grand Canyon has become for me a metaphor for confronting any fear. The message is simple: Instead of allowing fear to be a paralyzing force, confront it one step at a time.

You don’t need to be afraid of heights to know fear. Fear is the single most limiting force in our lives — whether it’s fear of failing at a new venture, fear that our ideas will be rejected, fear that we’ll lose our jobs, or fear that people will discover we’re not as competent or talented as they think.

The difference is that unlike my fear of heights, many of us don’t realize our fears and we don’t comprehend how they hold us back. Until we can name them, we can’t confront them.

I realized that my fear of heights was crippling when I admitted the lengths I was taking to avoid my fear. People use avoidance around fear all the time: we avoid speaking frankly or truthfully for fear of confrontation or for fear of being perceived as a whistleblower.

We avoid showing emotion or appearing too human for fear of being perceived as weak; we avoid excelling, for fear of being given more responsibility that we won’t be able to handle.

 

We become conditioned

In some cases, our mechanisms for avoidance are so ingrained we fail to notice we’re even doing them anymore. A boss who has a longstanding habit of intimidating employees and creating a climate of fear will be slow to admit that his behavior is masking his own fears — fears of his authority being challenged or undermined, or fears of being exposed as an ineffective leader.

An employee who fears management may go to great lengths to hide issues of safety on the plant floor; he fears that if management finds out, he’ll lose his job. Avoidance takes energy — negative energy, and can leave us physically and psychologically exhausted over time.

Both the boss and the employee may be so accustomed to avoidance that they fail to realize the toll it’s taking on them. They don’t realize that they would be more effective (and safer) if they confronted their fears rather than avoided them.

Are you using avoidance as a tactic when it comes to fear? Are you spending energy and devising tactics to avoid what you fear?

 

Where to begin a solution

Begin by paying attention to what you’re avoiding. Listen to your gut as you go through your day. Are there instances where you avoid doing/saying what you know is in your best interests because you fear the result?

Take small steps. Once you know what you’re avoiding, force yourself to take small steps in the direction of your fear. If you’ve gotten feedback that employees find you unapproachable, what can you do to be more open? Start with a small time commitment, such as five minutes.

What can you do in five minutes? Believe it or not, five minutes can be powerful. Perhaps initiate a five-minute conversation with an employee — ask a question, listen attentively to the answer, and then restate what you heard.

Fear keeps us stuck in place — for weeks, months, or even years. The only way forward is through awareness and willingness — awareness of what we fear and willingness to take the first step.

 

Donna Rae Smith is a guest blogger for Smart Business. She is the founder and CEO of Bright Side Inc., a transformational change catalyst company that has partnered with more than 250 of the world’s most influential companies. For more information, please visit www.bright-side.com or contact Donna Rae Smith at donnarae@bright-side.com

Published in Akron/Canton
Thursday, 28 February 2013 19:00

Northeast Ohio Movers & Shakers: March 2013

VeDISCOVERY, a tier-four provider of computer forensic services, data collection and processing, comprehensive document review and hosting of unstructured information recently appointed Wayne Pignolet to chief operating officer, Paul Cervelloni to vice president of sales and Martin Mangan to vice president, product development.

Pignolet is an experienced business leader with small and midsized organizations and joins VeDISCOVERY to manage all aspects of business operations. He has successfully started and also helped turn companies around in China, Europe, Mexico and the U.S. He has worked with Moen Inc., Hanley Wood and has owned his own business.

Cervelloni has held several positions within the information technology industry. He has served as the CIO for Fortune 500 companies and led complex buying processes for global enterprise software and services. He has extensive sales training and experience, which helped him sell enterprise software to corporations that valued stable, scalable, high-performance IT assets.

Mangan is responsible for the vision, implementation and creation of the VeDISCOVERY platform suite and is experienced in all facets of software development, database design, data processing and testing. Mangan leads a team of eight developers, designers and quality assurance professionals who understand the complexities and needs of processing semi-structured and unstructured data.

 

Alliance Solutions Group, a full-service staffing and recruitment agency with offices in Cuyahoga, Summit, Portage, Franklin, Lorain, Lake, Mahning, and Wyoming counties, has appointed Rob Sable as its new CIO.

As part of Alliance Solutions Group's executive team, his responsibilities include overseeing the company's overall information technology operations, support and strategy. He will also manage the implementation of new technology tools across the company's seven branch offices and nine business units, with particular emphasis on creating new tools and systems that improve the staffing process in ways that create competitive advantage for the company.

In his new position, Sable will utilize his 16 years of experience in IT consulting and enterprise software to ensure that the company's clients are matched with the right talent as quickly as possible.

Bruner-Cox LLP recently announced the promotion of Lisa Hilling to assurance services partner.

Hilling joined Bruner-Cox in 2005 with eight years of “Big Four” accounting experience. As partner Hilling provides audit and accounting services for hospitals, colleges, private foundations and governments. She is also responsible for audits in accordance with OMB Circular A-133 and Government Auditing Standards.

 

 

League Park Advisors, a boutique investment bank, has announced the promotion of Wayne Twardokus to director. Since joining League Park in early 2011, Twardokus has led the firm’s Industrial Group closing six deals in the specialty chemicals and gas, specialty distribution, and manufacturing industries.

Prior to joining League Park, Twardokus was employed at Harris Williams & Co. and its predecessor entity, National City Corp., where he originated and executed mergers and acquisitions for publicly traded and privately held middle market companies. During his time at National City he authored various industry research reports with a focus on the specialty distribution and industrial manufacturing industries, in which he remains active today. Prior to Harris Williams, Wayne was a member of the distribution practice at Brown Gibbons Lang & Co.

 

 

Brouse McDowell, a leading regional business law firm, has announced that Clair E. Dickinson, former Ninth District Court of Appeals Judge, has rejoined the firm in the Akron office as a partner in the Appellate and Litigation Practice Groups.

Dickinson previously served as firm counsel and chair of both the firm’s Appellate and Litigation Practice Groups. He also served nearly eight years as a member of Summit County Council and was president of that body for three years.

During his almost 12 years in the court, Dickinson participated in deciding more than 4,000 cases and wrote the lead opinion in approximately a third of those cases. He has both argued cases before the Ohio Supreme Court and sat as a visiting justice on that court. Dickinson’s practice will be focused on appellate advocacy and litigation.

 

Brouse McDowell is also happy to announce that Meagan L. Moore, an attorney in the Cleveland office and Elizabeth G. Yeargin, an attorney in the Akron office, have been named partners in the firm.

Moore is a member of the Environmental Practice Group and focuses in the areas of environmental litigation and counseling. She provides regulatory compliance support to the firm’s industrial and municipal clients in matters relating to water, air, solid waste and hazardous waste and assists clients in reducing their exposure to environmental liabilities in transactions. She is also a part of the firm’s Insurance Recovery Practice Group where she focuses on cost recovery for underlying environmental liabilities.

Yeargin is a member of the firm’s Business, Corporate & Securities and Business Restructuring, Bankruptcy & Commercial Law practice groups. She focuses her practice on transactional work, principally in the areas of mergers and acquisitions, general corporate law, finance, and commercial transactions and agreements.

Published in Cleveland

Early signs, notably positive economic indicators and rising corporate earnings, point to an M&A market poised for strong deal flow in 2013. Sustained improvement in these trends will bolster confidence and bring more buyers and sellers to market. Buyer cash reserves and an accommodative credit market should lend further support.

January deal volume was light, down nearly 20 percent from a year ago, but not atypical of a seasonally slow month for M&A. Behind the numbers are several billion-dollar-plus deals, including ConAgra’s $6.7 billion acquisition of RalCorp Holdings. Other mega deals announced in recent weeks were Liberty Global’s pending $24 billion acquisition of Virgin Media, Reliance Steel’s $1.2 billion acquisition of Metals USA, and Dell’s $22 billion take-private by Silver Lake Partners, marking the largest LBO since 2007. These are strong signals that buyer confidence is returning and likely harbingers of more M&A activity on the horizon.

Local corporate buyers are on the hunt for deals. Timken Co. acquired Denver-based Wazee Companies LLC, a $30 million provider of motor, generator, wind and industrial crane services to the aerospace, mining, power generation, and oil and gas markets. Lincoln Electric Holdings Inc. acquired Tennessee Rand Inc., a $35 million manufacturer of tooling and robotic systems for welding applications in Tennessee, complementing its purchase of Wayne Trail Technologies last May. CBIZ Inc. purchased Diversified Industries Inc., a Minnesota company that provides payroll and human resource solutions to small and midsized businesses nationwide, making it its ninth acquisition in the last 12 months.

Notable private equity activity includes five deals from The Riverside Co., including Operating Tax Systems, which provides driver and vehicle compliance services primarily for the commercial motor vehicle industry. Other buys include Austin, Texas-based Alchemy Systems LP; Houston-based Jacosoft LLC; Bohemia Interactive Simulations s.r.o. of Australia, and GiveAnything.com Inc., a N.Y.-based company.

 

Deal of the Month

 

Global environmental consulting, engineering and technical services company Tetra Tech Inc. acquired American Environmental Group Ltd. of Richfield, a provider of specialty environmental, design, construction and maintenance services to solid and hazardous waste, environmental, energy and industrial clients. Founded in 2002, AEG employs 500 with annual revenue of approximately $95 million. Tetra Tech adds an East Coast presence with AEG, complementing its comparable legacy operations in Southern California, enhancing its ability to assist landfill operators, mining and power clients with disposal challenges.

AEG is Tetra Tech’s fifth acquisition announced in the last 12 months. Including AEG, the company completed two acquisitions in the U.S., two in Brazil and one in Canada. Tetra Tech employs 13,000 people worldwide and reported sales of $2.0 billion in fiscal year 2012.

Andrew K. Petryk is managing director and principal of Brown Gibbons Lang & Co. LLC, an investment bank serving the middle market. Contact him at (216) 920-6613 or apetryk@bglco.com

Published in Cleveland

Nearly four years ago, when Tom Salpietra joined EYE Lighting International of North America Inc. as its president and COO, a woman approached him interested in operational development at the company.

Since Salpietra was a new leader, it was expected that he would make changes within the company to improve EYE Lighting International while keeping the best things about the company intact.

“Everybody is going to have things wrong, but if you preserve what’s right, that’s where the secret is in organizational development and implementing change,” Salpietra says. “If you screw up the things that are right, that’s where you go wrong.”

Salpietra worked with her to develop questions to interview the employees about what they liked at the company. Since this was an appreciative inquiry the study only focused on what the employees thought was sacred about EYE Lighting International, not about what needed to be fixed.

The study found that every employee was extremely engaged in the company and its business.

“This was how we developed the four basic principles around the customer,” Salpietra says. “We made the customer the center of the business and did process improvement to all the things that we do on a day-in and day-out basis.”

EYE Lighting International is a nearly $100 million U.S. division of Iwasaki Electric of Japan. The company designs and manufactures high performance lamps, luminaries and lighting-related products that serve major commercial, retail, industrial, utility and specialty application lighting markets in North and South America.

Since Salpietra’s arrival at EYE Lighting, he has been focusing on efforts to develop new technology and to keep the organization’s sights on the next big thing in the lighting industry all while maintaining employee engagement levels.

 

Progress your company

EYE Lighting International’s unique competitive advantage is how the company doses the arc tube of its lighting products (dosing refers to the mix of metals inside the arc tube). The market is currently producing a lot of high intensity discharge (HID) lighting but soon the market will move to LED lighting. While LED works in certain applications, it is expensive, and there are still kinks to work out in other applications where it’s not ready for prime time.

“We’re trying to shift the company from just making HID lamps to offering broader solutions in our market segment,” Salpietra says. “We’re not going to stray from our core competency, which is dosing the arc tube and making unique types of lamps. The challenge we have is if we don’t move in that direction, our years and decades of existence will start to decline.”

As a management team, EYE Lighting knew that the company didn’t have to change too much to succeed, but if it didn’t start changing and moving in a certain direction, it wouldn’t be in that same kind of comfort zone it has been three, six or 10 years from now.

“We’ve taken it very seriously that what we do today will impact the company years down the road,” Salpietra says.

With the lighting industry making a slow transition into LED, Salpietra and his team had to look for opportunities that better suited EYE Lighting’s general lighting purposes until LED is ready for the applications where the company would primarily use it.

“The merging of the two traditional technologies into ceramic metal halide gave us the ability to continue to do what we do, which is making lamps,” Salpietra says. “If that technology wasn’t there, we’d be lost and everybody would be rushing to do LED more quickly.”

What EYE Lighting has been able to do is make the regular technology much more efficient and deliver white light, which creates good color rendering and color temperatures to be able to see both in the day time and at night.

“It’s been proven that white light versus a yellow light or a blue light make a big difference in being able to see,” he says. “If you can make your light create the spectrum that matches the way the human eye wants to see the spectrum and discern it, you’ve just enhanced the way you do it.”

On top of developing new technology to enhance the company’s core offerings, EYE Lighting has been looking for broader applications to its technology and has its sights on potential partnerships that could benefit the company.

“When we do our strategic planning, we look heavily at our core competencies and what we think we can do with new technologies,” he says. “Part of every good company’s strategy has to be looking at the M&A side of things as well; you want to grow organically, but what should you do to augment that growth with outside skills and services?”

Salpietra and his team are keeping their options open for potential strategic alliances, mergers, joint ventures or buying a company outright.

“In order to grow and thrive and create jobs and create value for our customers, shareholders and employees, we’ve got to look at the overall business and determine what we can be looking at to expand our business beyond what we do day-in and day-out,” he says.

A big move that EYE Lighting made in November 2012 was the acquisition of Aphos Lighting LLC, which expedited EYE Lighting’s move into LED. The products acquired are LED-based luminaires that carry with them 14 different design patents for their optical, mechanical and thermal management performance. EYE Lighting will maintain the Aphos name for this new line that will expand its business by introducing LED luminaires to municipalities, utilities and industrial customers.

“As we’ve looked in the general lighting market space, we ask ourselves what’s our core competence and where do we want to go. We get involved in a lot of unique things that stem from our core technology.”

The other areas in which EYE Lighting participates, in addition to the general lighting market, are institutional, educational and hobby markets.

“Because we dose that arc tube differently than anybody else in the world, we’re able to recreate some spectral distributions of light,” he says. “Not just the color of light, but the intensity and what light rays are being emitted from the lamp.”

Due to this ability, EYE Lighting can make lamps that enhance plant growth, as well as lamps that can simulate solar power for use by companies or universities doing solar tests. The company also makes solar aging equipment for businesses such as Sherwin-Williams, Behr paint, automotive companies that make windshield wipers, roofing companies, and anything that’s outdoor-oriented.

“Those types of companies want to test in a lab whether or not they’re going to get a 30-year warranty, but they don’t want to test for 30 years,” Salpietra says. “The equipment nowadays has you test six to nine months to be able to project a 20- or 30-year lifespan.

“We make a machine which is called a super UV. You can put samples in the machine and within three weeks we can equate 10 to 15 years. We can also put more than just UV rays on it; we can also put water on it and chill it.”

These types of broader offerings are due to the highly engaged employees that EYE Lighting has been able to keep around the business over the years.

 

Keep employees engaged

With a Japanese parent company, EYE Lighting puts a lot of focus on lean manufacturing and kaizen events, and 130 employees are quick to recommend how to better the business.

“What is unique about us is that every employee on the factory floor changes positions at least once a day,” Salpietra says. “Everybody is highly cross-trained and capable of performing at least two different jobs.”

Some employees remain in the same department and move upstream in the process versus downstream. Others will go from one department that transforms the raw material, and then they go to the end of the line to do packaging.

“It allows us a tremendous amount of flexibility,” he says. “The employees love it because they don’t get bored in their daily job. Ergonomically it’s good for them because they’re not doing the same repetitive task day-in and day-out when they come here. It helps keep them alert and safe, especially when they know different jobs and how to behave around different pieces of equipment.”

One thing missing from EYE Lighting that most other manufacturers utilize is a suggestion box. Salpietra says his employees will come forward with ideas on their own, making a suggestion box unnecessary.

“Everything emanates from the floor,” he says. “When the employees change jobs by going upstream or to another department, they see the product of their work or the beginning of what comes to them to pass on to somebody else. So they inherently get together to have a kaizen event over a particular issue.”

To aid in employee’s abilities to help the company further its growth and development, Salpietra and his team implemented four core principles: customer-centric, process improvement, financial focus and talent development.

“We did this rather simplistically to make sure that it was easy for everyone to recite and keep it close to them day-in and day-out,” Salpietra says. “We keep our customer at the center of our business. We deal with process improvement, which is part of our DNA as a Japanese-owned division.

“And everyone in every organization wants to improve and enhance the skill set of employees, so we push our people to get out of their comfort zone.”

 

Develop your talent

To keep EYE Lighting employees on their feet and thinking about different aspects of the business, Salpietra made talent development a big part of the organization’s core principles.

“We added talent development because that captures what we do on the factory side that we want to do throughout the whole organization, which is work out of your comfort zone,” Salpietra says. “You’re going to become more knowledgeable and more valuable for yourself.”

To allow your employees to grow and develop, you have to be willing to give them the tools and resources to do so.

“You need to have an open-door policy,” he says. “The leadership, especially new leadership, has to develop two things primarily — trust as a leader and then respect comes. Then you can develop the feeling of hope. If the employees see that there’s hope in things and they become a part of that, it will help engage them.”

That engagement will also help when your company has to make a tough decision or make a change in direction.

“It’s very important that you get a lot of group interaction so that when you go to make a decision or implement a change, everybody is onboard with that,” he says. “If you engage your people and say, ‘Here’s what we’re going to do. We’re going to move in this direction and we’re going to need your help. We do not know all the answers.’

“They love to hear that because they will have questions and suggestions for the company. As much as you engage your employees, they will become engaged on their own. All of a sudden ideas and suggestions will start surfacing.”

 

How to reach: EYE Lighting International of North America Inc., (440) 350-7000 or www.eyelighting.com

 

Takeaways

Keep yourself in tune with your industry and where it’s going next.

Always think about ways to broaden core offerings.

Develop talent and keep employees engaged in the business.

Published in Cleveland

During a difficult economic environment or in markets with significant price pressure, sales growth is often elusive and seldom a near-term solution for increasing the profitability of a business. Cost reduction, on the other hand, can have an immediate positive effect.

When companies do a “deep dive” analysis of their cost structure, they can almost always find ways to cut costs without sacrificing quality or customer service, and that “win-win” drops right to the bottom line.

In our experience, a 30-day review of costs will yield extensive insight that can translate directly into cost reduction. We recommend a “quick and dirty analysis” led by a strong cross-functional team. We suggest two specific techniques for conducting this kind of analysis:

Ratio analysis

This is a tool used to conduct a quantitative assessment of a company’s financial statements. Ratios are evaluated by comparing each major cost category to prior years. This internal analysis can then be compared to a peer group of companies.

Ratio analysis of financial statements encourages decision-makers to look at the trend of costs versus activity levels (sales) over time. It enables you to spot trends in the business and compare current performance with the best ratios of prior years.

To get a complete picture, the ratios should be measured against peers’ ratios, as well as comparing the business’ performance over several years. We suggest paying special attention to when and how any unfavorable trends may have developed.

When looking internally, the business should evaluate at least five years (ideally, up to 10 years) of historical numbers in fundamental areas such as sales, materials and labor costs, overhead, gross profit, selling, general and administrative costs.

A macro analysis requires the team to identify the best ratio in each category. For example, if the third year has the best ratio in a category, then that ratio provides a snapshot of the “ideal” situation. Once the other best historical ratios in each category are identified, the business will then have a complete picture of what’s possible.

We recommend conducting a macro analysis not only internally but also against a peer group. The macro analysis should be done with the major cost categories on your company’s profit and loss statement.

As a next step, a micro analysis allows the business to drill down into the specific cost elements in each major category. For example, if the macro analysis category was general administrative, that area could be segmented into salary, wages, fringe benefits, supplies, travel and entertainment. These segments would then get a similar ratio analysis conducted upon them.

While this type of analysis is often laborious, it can provide very clear indicators of what can be done to “claw back” unnecessary costs.

The purpose of micro and macro ratio analysis is to take the best ratios of each cost category and build a target profit and loss statement utilizing those best ratios. You then try to get your current P&L statement to replicate those best ratios. The benefit of cost reduction is that it requires little capital cost and no working capital or debt.

Constant dollar sales per employee

This technique measures the average revenue generated by each employee of the company, and is calculated by dividing a firm’s revenue by the total number of employees.

Revenue per employee is a rough measure of how productive a particular company is utilizing its employees. In general, relatively high revenue per employee is a positive sign that suggests the company is finding ways to leverage more sales out of each of its employees.

The reason for measuring constant dollar sales is that the CDS calculation removes inflation. Labor needs vary from industry to industry and labor-intensive companies will typically have lower revenue per employee ratios than companies that require less labor.

Hence, a comparison of revenue per employee is generally most meaningful among companies within the same industry. Ultimately, increasing your constant dollar sales per employee will lead to expanding margins and improved profitability.

 

Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in more than 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation, a member of the University Hospitals Board of Directors, corporate co-chairman for the 2013 Five Star Sensation, and chairman of the National Kidney Walk.

Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies. He is also the chairman of the National Kidney Foundation Golf Outing.

Published in Cleveland

Steve Phillips doesn’t understand why customers in today’s world wouldn’t want help from a salesperson. But he’s not so stubborn that he refuses to believe it is true.

“My son keeps talking about stranger danger, that customers don’t want to be approached by salespeople anymore,” says Phillips, president and CEO at Phillips Furniture Co. and six Ashley Furniture HomeStores in the greater St. Louis area.

“As a leader in my position, this is where I’m going to have to rely on these young people to make decisions that will put us in a great position for younger customers.”

Phillips Furniture is a family-run business that launched in 1937. Phillips doesn’t see things the way his father did. His son, Michael, the company’s vice president of advertising and merchandising, doesn’t always agree with his father’s point of view.

But it’s their ability to respect each other’s differences and then reach a consensus on how to operate the business in today’s world that allows the company to succeed.

“I’m hearing what they want, and I’m OK with what they want,” Phillips says of the younger generations that are becoming a larger part of both his customer and employee bases. “It’s just foreign to me. But as a leader, I have to be willing to let them try things that I’m not familiar with.”

Phillips says it’s not always easy to move away from behaviors that you’ve grown up with and used to achieve success. And he doesn’t always believe it’s necessary to shift away from something that has become a proven success. But if it is necessary to change, doing so beats the alternative every time.

“It is tough,” Phillips says. “But it’s tougher if you fail. If I keep dictating policy and how we’re going to do things based on how we did it in the past, I know we will die and that’s not good. So I just really trust these young people, and I trust the organization. If we truly have the customers’ best interest at heart, we’re going to do what they want, not what we want.”

It’s that idea of constantly seeking a better way to please customers that drives Phillips and his 330 employees.

 

Set a foundation

Perhaps one of the reasons Phillips is more agreeable to accepting new ideas is that he has been reluctant to follow the crowd when it comes to furniture salesmanship.

“The furniture business has not had the greatest reputation for integrity,” Phillips says. “A lot of people give false high prices and fake savings, and I didn’t want to do business that way. We have one price on a piece of furniture.”

The problem for Phillips is that many employees who have worked in the industry for a number of years were trained to take the misleading approach.

“There was a very specific way we wanted to do things that was not normal in the furniture business,” Phillips says. “That’s why we don’t necessarily want people who have been in the furniture business because we don’t know what their training background is.”

The solution for Phillips was to create a training program that new employees must go through before they are allowed to speak to a customer.

“So everything that we do structurally and integritywise is ingrained before they talk to their first customer,” Phillips says. “As a matter of fact, we probably don’t spend enough time talking about product. It’s more about how we do things. We have leadership round tables every month also. We have our leaders come in and we just go through what’s important to our customers.”

The goal is to have a sales team that doesn’t just talk a good game when it comes to pleasing the customer, but they can actually show how they’re going to do it.

“They have to role-play to show us, not just tell us, but show us they know how to service customers the way we want them to,” Phillips says.

That’s the end result. The steps for getting to that point where employees have the ability to display those skills must be dutifully followed if training is going to work.

“You can’t train or correct anything until you can measure it,” Phillips says. “We know how many pieces per hour some of our furniture assemblers can do and what the standard is. We know how many pieces per hour one man can unload on a truck. You can’t manage and train until you know what the issue is, which is only done through measurement.”

Once you have that data to work off of, you’ve got to put what you want to do in writing and then make sure you do it.

“If it’s not in writing, it’s not real,” Phillips says. “So everything is in writing, and you just go over it step by step. They can’t be promoted until somebody observes and there is a physical check-off that this is what they can do.”

If you don’t believe you have time to conduct training with an already cramped schedule, you’ve got to find a way to make it work.

“Training has to be a priority,” Phillips says. “If you get caught in the treadmill of doing business all the time, you’ll never get off the treadmill and start training. If you train and make it part of your culture and your business religion, you don’t think about it as being a disruption of your normal process. It is your normal process.”

 

Take a visible role

Many leaders will talk about how important a training program is, but then they personally move on to other things and leave the team to figure out the best way to make it work.

Phillips says you have to do more than that as CEO.

“Every training class we have for salespeople, I’m the first presenter,” Phillips says. “I take the first hour or so and tell them about the company and what we stand for.”

The company’s COO tackles the next segment and then training responsibility shifts to Phillips’ brother, Matt, who heads up training at Phillips Furniture.

“What we want these people to see is that everybody at the top also believes in everything we do,” Phillips says. “The fact that we spend so much time with them, we certainly hope that’s what they believe.”

As a way to encourage leaders to want to take part in the training process, Phillips suggests rewards for leaders whose direct reports receive promotions.

“A lot of leaders withhold knowledge or training for fear of somebody rising above them,” Phillips says. “Our managers are rewarded for having someone promoted from beneath them. We love store managers who want their assistant managers or their team leaders to be promoted. They don’t feel threatened by it.”

 

Focus on core values

The other piece of the puzzle for Phillips is core values. While he is open to changing training methods and operational policy, he leaves no wiggle room on his commitment to the company’s core values.

“No matter what processes or changes you make in your business, you can still hold tightly to your core values,” Phillips says. “That’s the one thing I will never negotiate — how does it look with our core values. You have to keep that out there in front.”

Arriving at the three core values that define Phillips Furniture was no easy chore. Phillips and a team of more than a dozen leaders left the company’s headquarters and headed to a remote cabin in the Ozarks. Once they arrived, it took three days to finish their work.

“There were a lot of great ideas,” Phillips says. “I just didn’t want a lot of them. We could have had 10 great core values, but I wanted to be able to sink our teeth into three or four. Once you get past three or four, they start becoming a little redundant. These were three that nobody could ever argue with.”

The three core values they decided on were “integrity above all else, honesty in all we do and service to others first.”

“If you can get your entire organization to buy in to those three things, you have a much easier time finding great leaders because leaders want to buy into something greater than a dollar,” Phillips says.

Some companies consider “making a profit” a core value and Phillips says he understands, even if he doesn’t agree with it.

“We think that’s the result of doing the first three,” Phillips says. “So we wanted the core values to produce the results that we were looking for.”

Phillips says his company wants to make a buck as much as anyone. But by focusing on other things, such as the customer experience, employee readiness and job satisfaction and giving back to the community through charitable efforts, everybody comes out ahead.

“It’s imperative that a company stand for more than a dollar,” Phillips says. ?

How to reach: Phillips Furniture, (314) 966-0047 or www.phillipsfurniture.com or Ashley Furniture HomeStore, (314) 845-3084

 

 

The Phillips File

 

Steve Phillips

President and CEO

Phillips Furniture Co. and Ashley Furniture HomeStores/St. Louis

 

Born: Dayton, Ohio

 

Education: I went to the University of Missouri for three years. I got married when I was 20, and I got tired of being broke, so I quit school and took a job.

 

What was your very first job?

Raising vegetables and selling them door-to-door. I’m an avid gardener, and I still am to this day. My first full-time job was in the furniture store while I was going to school at Mizzou.

 

What got you into gardening?

My dad had an extra lot next to the store. I always wanted to be a farmer my whole life, and now I do own two farms. There is something really neat about getting your hands in the soil. He gave me this plot of ground, and I had a wagon. I would load it with vegetables I grew and picked and I would take them door to door to our neighbors. I didn’t have prices. I always said pay me what you think they are worth and I got taken advantage of quite a bit. So I learned not to do that the next year.

 

Who has been the most influential person in your life?

It would have to be my mother and my father. From a business point of view, it would have to be my father. He was the most patient and kindest man you ever met. I never saw him raise his voice ever. I don’t know that I got those traits from him, but I’ve always admired those traits. My mother had six kids and she’s a phenomenal woman.

 

Takeaways:

Don’t be afraid to change.

Make the time to do training.

Don’t choose too many core values.

Published in St. Louis