April issue has something for everyone

The 2018 Smart Women award winners were particularly impressive, and it’s nice to read some good news in the wake of the #MeToo movement. I was inspired — and a little envious — by the great things these 16 women, two men and two organizations are doing.

I also want to encourage our readers, both men and women, to attend the breakfast event on April 17. Not only will we recognize our winners, the panel discussion should be thought provoking.

This year’s theme is about what it means to be an authentic leader — someone dedicated to building and fostering a strong culture for women in the workplace. How do women in business get to a place where they are comfortable in their own skin, no matter what their industry or position? How can executives build a workplace culture that provides opportunities for everyone? How can you be a leader who is authentic, yet still culturally conscious?

One of the most inspiring leaders in this issue is Nancy Kramer.

I caught up with her to discuss what she’s been up to since selling Resource/Ammirati to IBM. She may no longer be the top decision-maker, but she’s gained new insights through different experiences. As part of IBM iX, she now has access to exciting new technologies like machine learning, quantum computing, artificial intelligence and blockchain.

Kramer also spoke specifically about two global studies by IBM, which may be useful for your business. One looks at the importance of brand belonging, and the other examines how established companies can digitally transform their organizations to stay competitive. You can find links to those in the story.

On the subject of transformation, exciting things are happening in Columbus’ restaurant scene. It’s not just a hub for restaurant corporations, so don’t miss the Uniquely, which explores some of the area’s strengths.

In addition to restaurants, Columbus has traditionally been a retail powerhouse. ELOQUII, featured on page 18, has a different take than most, as it’s an online retailer adding brick-and-mortar locations.

I also recently saw a statistical databyte by Thoughtwell (formerly Community Research Partners) on this very subject for the Columbus metro area. Check out “Brick & mortal retail: Are reports of its death exaggerated?”

Hard work + discipline = success

Last month, hundreds of area dealmakers — business owners, private equity investors, entrepreneurs and service providers — came together for Smart Business’ first ASPIRE conference in Pittsburgh. Experts talked about buying and selling businesses, raising capital, and liquidity events, including the trends they’re seeing in the market.

It was an educational and exciting day. However, if you missed the Pittsburgh event, don’t worry. We’ll be holding ASPIRE events in Cleveland in May and in Columbus in September, and I know some Pittsburgh attendees will be heading out to those, as well.

Merger and acquisition activity remains high, which is part of the reason why I asked John J. Engel, chairman, president and CEO of WESCO Distribution Inc., about his advice on the subject.

WESCO has completed more than 40 acquisitions since it spun out as a standalone company in 1994, and Engel says it’s an important topic for him and his team.

WESCO’s largest acquisition, EECOL Electric Corp., a Canadian company, was finalized in 2012 and cost more than $1 billion. WESCO, however, worked on its relationship with EECOL for well over five years before the deal.

In general, Engel says the majority of acquisitions never close because even if the deal makes sense strategically on paper, the cultural and integration aspects get in the way.

“I’ve seen other companies that don’t spend the time on that pre-acquisition close,” he says. “They worry about the financial model. They worry about the strategic rationale and all that stuff, how to finance it, but they don’t spend the time getting to know the talent and then figuring out exactly how will this talent integrate in. And will it even fit culturally?”

It takes a lot of hard work and discipline behind the scenes before an announcement is made.

One organization that isn’t afraid of hard work is Fort Ligonier, featured in the Uniquely. The fort is at the tail end of a renovation with new exhibits, more hours and an education center. Executive Director Annie Urban says the fort’s staff got it all started by putting together their ultimate wish list for what an optimal visitor experience would be like, and then stuck with it to make much of the list a reality.

Bring the walls down; bridge the divides

Nine years ago, when Creative Director David Brown founded the Harmony Project, his idea of Columbus was not very diverse — mostly white, affluent and educated. But that only scratches the surface.

Brown says diversity isn’t just about race or religion. It encompasses education, socioeconomics and life experiences. Harmony Project connects all types of people through the arts, education and volunteer community service.

“We have to figure out how to connect people across those divides. The divides are not going to go away. We’re not about trying to get people to vote the same way or even to agree on political hot button issues,” Brown says. “We’re about setting those to the side and saying, ‘A playground doesn’t care if you voted for him or her. A community garden doesn’t care if you believe in God or don’t believe in God. Meals that need to be served don’t care if you have a doctorate or if you didn’t graduate from high school.’”

If everyone rallies together, more gets done, and if you work with people who are different, your fears naturally decrease, he says.

Brown sees this, too, with the business leaders who are part of the organization.

When Harmony Project paints a community mural, he says a CEO of a major Fortune 500 company could be on one ladder, while the next ladder holds someone who just got out of prison. They have no idea who the other is, but they’re both there helping. And if they happen to have a conversation, it’s not forced or guided; it’s organic.

Developing a true community where everyone buys in — whether throughout the city or within your office — means getting out of your comfort zone.

“It’s important that you get out of your company. It’s important that you get out of your own neighborhood. It’s important that you get out of the schools that are familiar with you, and the communities that are familiar with you,” Brown says. “And it’s important that each organization and each company find ways for the mail clerks and the janitorial staff and the senior VPs to interact.”

Learn about M&A from the experts

Dealmakers who have experience with mergers and acquisitions typically enjoy the challenge. They’ve learned how to navigate the negotiating table, deal terms, integration and more, and are always looking for their next big deal.

Business owners and entrepreneurs, however, may only go through this process once or twice throughout their entire career.

That’s why it’s so interesting to peel back the curtain of M&A, with insights from those who know it best. The cover story in this issue does just that with an array of perspectives from Pittsburgh investors, business executives and dealmakers.

The elements of a successful business deal seem to be similar to what makes a strong business — knowledgeable, enthusiastic, hard-working people; a culture where everyone is going in the same direction; a well-thought out and clear strategic business plan; and innovation and creativity to inspire new directions for the company.

In addition, if the cultures don’t align, too much energy can be expended debating and resolving conflict. That’s energy that’s better spent executing the strategic plan and providing the products and services that are central to the business.

I learned a lot about what makes a deal successful, what missteps to keep an eye out for and the key ingredients to try to replicate — and I hope you do, too.

However, this is just the tip of the iceberg. Our daylong ASPIRE conference on March 8 will include even more experts, and the attendees will have the opportunity to ask questions. So, even if you’re not attending this year, please watch the magazine for future opportunities to learn from the best.

One of the highlights of ASPIRE 2018 will be a lunchtime panel discussion on the state of Pittsburgh’s technology sector. That’s why I asked three experts to name their top five hottest startups in the region as part of this month’s Uniquely. Imagine my surprise when I received 15 different answers, with no repeats.

It goes to show that the technology and startup scene is booming, and there will be a lot to talk about at lunch on March 8. I hope to see you there!

Seeing both sides of the situation

The business leaders in this issue have dealt with major changes in their organizations. Some of it was out of their control, while other changes were driven by them. But in either case, they didn’t freeze. They focused on the opportunities, as well as the challenges.

Vector Security President and CEO Pam Petrow is leading her company through major changes in residential and commercial security. Everything is about automation — hooking your house or business up to one infrastructure.

Petrow remembers selling $5,000 residential systems in high-end neighborhoods 35 years ago. Now, residents use their cameras for things like seeing when the dog sitter arrives so they can remotely unlock the system, let that person in and know when he or she leaves.

She and her team at Vector are embracing these changes and working hard to find their place in the new dynamic. They’ve even led a national effort in 911 facilities across the country, promoting the adoption of an Automated Secure Alarm Protocol in municipalities and public agencies, while working with their competitors on implementation. The system automatically transmits data to dispatchers to improve response time.

Vector isn’t the only organization to see the possibilities. Steve Smith, CEO of Plus Consulting, had some experience working in global markets, but he got a crash course in Australian culture after acquiring a company down under. He had to utilize a lot of communication as a result, and has since applied his lessons learned to other potential acquisitions.

Every situation has its pluses and minuses, and time and time again, I hear executives say that you’ve got to see both. No matter how challenging something is, there may be a way to turn it into an advantage, and the rosiest of situations can always be improved upon.

Editor’s Note: Please join us on March 8 for ASPIRE 2018, presented by Metz Lewis Brodman Must O’Keefe LLC, where we will bring together the region’s entrepreneurial, dealmaking and investor communities for a daylong event filled with dynamic keynote speakers, engaging panel discussions and power networking opportunities. Reserve your seat today.

A business discussion about the Franklin Park Conservatory

This month, part of my conversation about the new Scotts Miracle-Gro Foundation Children’s Garden at the Franklin Park Conservatory and Botanical Gardens, featured in the Uniquely, focused on the business behind the nonprofit.

Over the decade that Bruce Harkey has been president and CEO, the organization has transformed. Its annual revenue grew from $5 million to more than $10 million as both earned and contributed revenue increased.

While Harkey studied horticulture, he also knows business and worked for Honda for 18 years. He uses both skill sets in his job.

“One of the characteristics of this organization that is different compared to other botanical gardens is our earned revenue is 65 percent,” he says. “The typical industry average is about 35 percent.” (The conservatory can be compared against the 64 large botanical gardens across the country, which have budgets of $3 million and above.)

Ten years ago, the conservatory’s percentage of earned revenue was in the high 40s. Harkey says the change has come from a significant growth in education, event rentals and starting a catering business.

“We have worked very hard to ensure that the conservatory continues to strengthen its financial foundation so that we can be sustainable — to grow in a reasonable, responsible way to make sure that we’re debt free and that we’re growing our earned revenue,” he says.

Another focus is innovation, and part of that innovation is balancing art and horticulture, which started with the Dale Chihuly glass exhibition in 2003.

“A lot of botanical gardens do art installations, but I don’t know that they are as integrated into the DNA of the organization as they are here at the conservatory,” Harkey says.

Art is even one of the organization’s three pillars, which are botanical gardens and beauty, community outreach and education, and broad inclusion of the arts. The horticulture and exhibitions development teams, which Harkey has combined into one, work hand in hand. That way, horticulture works with the artists on staff to ensure visitors have a comprehensive, fulfilling experience, he says.

A resolution for more resolutions

It’s that time of the year. We make resolutions to improve ourselves. We self-assess to find weak spots. We want to be better, stronger. We hope to be kinder, friendlier. Or, at least a little lighter.

January may be cold and dark; it’s also a time for renewal. It’s a time to gain ground. The possibilities abound for new choices. I always hear about continuous improvement. CEOs stress this again and again. January puts that front and center — for our organizations and our lives.

We could forget our good intentions. We might slide into old habits. Our resolutions often fall away quickly. The potential, however, is always exhilarating. Turning change into routine can happen. We know that it’s not easy. But it is always worth trying.

This year, I’m setting up reminders — a calendar alert on my phone. This should make it stick longer. I hope my resolution becomes habit.

One week in, I’m usually good. Two weeks in, I start slipping. But the alerts will keep coming. I hope the reminder isn’t annoying. I hope to beat the odds. But if I don’t, don’t worry — there’s always next year (Cleveland joke).

I will keep trying to change. But I need to remind myself: January is one month of 12. Resolutions can be made all year. Continuous improvement is like it sounds. It’s continual, constant and always present. Progressive, smart companies work on themselves. Progressive, smart people do the same.

It’s that time of the year. But that time shouldn’t be limited. Change is not just for January. Improvement is always worth our time, especially when it betters the world.

 

This month’s Uniquely is with recent Columbus transplant Larry Smith who created Six-Word Memoirs® a decade ago. In honor of his national movement that is almost like an edgier version of “Chicken Soup for the Soul,” I wrote most of my editor’s note in six word phrases. It wasn’t easy, but as I just wrote, easy is not always best. And like New Year’s resolutions, it was worth trying.

Entrepreneurs take center stage in Pittsburgh

Being an entrepreneur wasn’t always as exciting. Until your name was on the outside of a building, the average Joe or Jane didn’t know who you were as you toiled away in a garage or basement. That’s starting to change.

Just like how the Food Network shed light on the exciting profession of chef, media has made entrepreneurship cool. TV shows like “Shark Tank” and Silicon Valley success stories like Steve Jobs and Mark Zuckerberg, who each got their own movies, inspire people who want to create startups and invent the next big thing.

Innovation Works is doing its part. President and CEO Rich Lunak calls its Demo Days, which are held twice a year, “a rock concert for entrepreneurs.”

Just like a sporting event or popular artist, Demo Days at Stage AE draw a big crowd. It’s a time to honor the people who have more of an impact than an athlete or musician, he says. These entrepreneurs are risking everything to build companies, create jobs and make our lives better.

Another chance to shine is the AlphaLab Gear International Hardware Cup. Early-stage hardware startup teams are selected to pitch in six regional semifinals. They then join teams from other countries like Japan and South Korea to compete for $50,000 in investment funds and more than $50,000 in software, cash and other prizes.

“That program is continuing to grow. What that’s done is help build international awareness around not only AlphaLab Gear, but also what a fabulous place Pittsburgh can be to launch and build companies,” Lunak says.

Just by coincidence, Innovation Works isn’t the only organization in this month’s magazine that is turning entrepreneurs into household names in the business community. The Idea Foundry just celebrated 15 years of investing and working alongside entrepreneurs to transform business ideas into commercial activities and jobs. You can read more in this month’s Uniquely.

Now is a good time to be an entrepreneur, especially in Pittsburgh.

Stark seeks $4 billion portfolio

Who: Stark Enterprises

What: Cleveland real estate firm makes first NYC acquisition

Why it matters: Company plans to double portfolio to $4B in five years

Start spreading the news. Stark Enterprises’ foray into the New York market is the most visible in a $600 million series of deals that has the Cleveland-based real estate company poised for explosive growth.

Stark recently paid $98 million for a six-story building at the bustling intersection of Flatbush Avenue and Fulton Street in Brooklyn. It has another $1 billion in the ground and is pushing hard to double its portfolio from $2 billion to $4 billion over the next five years.

“When you do a $100 million purchase in New York, you fall under a lot more scrutiny,” says COO Ezra Stark. “But it exposed us to a lot more deals. People are taking notice of what we’re doing, and that increases the exposure of our firm to other potential investors and deal flow.”

This week, we take a deeper look at Stark Enterprises’ growth strategy and the thoughtful approach the company takes to acquiring new properties.

Knowledge equals opportunity

Stark’s journey to buying the Brooklyn property can be traced back to Ezra’s time spent as a graduate student at New York University and working at Forest City Ratner Cos. in New York.

“Typically, it can be a challenge to learn a new marketplace if you’re approaching it cold,” Ezra says. “That’s why it’s critical to have local partners and boots on the ground. You can’t buy things sight unseen or base an evaluation on paper. You need to understand the contextual relationship the asset has to the rest of the neighborhood.”

Now at this point, you might be thinking, ‘I’m not interested in buying real estate. This story has nothing to do with me.’ Before you swipe left, consider this:

Nico Bolzan“We don’t look at ourselves as a company that just buys or develops property,” says Nico Bolzan, executive managing director at Stark Capital Group. “We are a true real estate operating company. When we look at a potential acquisition, we consider EBITDA, revenue, expenses, profitability, cash flow and upside — the same statistics you would look at if you were looking to buy a business.”

The company was fortunate to have Ezra’s knowledge of Brooklyn before it made that acquisition. But if he had not been there, the company would have done what was necessary to do its homework and gather the information and perspective it needed before pulling the trigger on the purchase.

“We approach every acquisition from all those different perspectives,” Ezra says. “That’s really been one of our secret sauces. We’re very proactive. We position ourselves to be responsive to opportunities. At the same time, we are seeking opportunities and we once we identify them, we’re in a position to hit the ground running.”

Expertise from every angle

There are two key components to Stark’s growth strategy: vertical integration and a willingness to embrace key strategic partnerships. We’ll start with vertical integration.

Stark owns Arbor Construction, a full-service construction firm; Comet Management, a multifamily leasing and management company; and Emuna Energy, which is focused on environmental sustainability. These are in addition to Stark Capital Group, the capital markets arm, and Exterior Services, which does landscape design.

This allows the company to provide all these services directly to its assets. And from an acquisition perspective, it is a critical tool that can be used in the decision-making process.

“When we’re evaluating an asset for acquisition or development, we sit around the table and with all of our teams,” Ezra says. “You have somebody from development, somebody from finance, somebody from legal, architecture, landscaping. Each of these departments brings its unique perspective to the discussion.”

When you’re committing large sums of money to make an acquisition — whether it’s a building or a business — that ability to understand all the details from a variety of viewpoints can make a huge difference. A prime example of the value of this process is that it forces you to consider the downside scenarios.

“When we enter into any acquisition, we say, ‘What’s our Armageddon? How do we protect the principal investment so that in a worst-case scenario, we don’t lose money,’” Ezra says. “I’ve seen a lot of people who think, ‘Well, it’s been growing at this rate for the past couple years, it’s going to continue to do so.’ As we know, everything is cyclical.”

A team of experts that cover all the bases minimizes the risk of missing something that could lead to headaches down the road.

A shift in approach

Partnerships are another piece of the puzzle at Stark. Historically, the company did not typically raise outside capital or rely on equity partners to complete acquisitions, Bolzan says. That changed when Stark decided to expand geographically and buy more income-producing assets.

“We already had the knowledge and the infrastructure,” he explains. “We had the base to do everything and we really wanted to grow the business. The only thing that was stopping us was the capital. So to bring in outside equity partners with us to buy acquire, develop and redevelop these properties, it allows us the ability to grow.”

At one time, Stark was 100 percent a development company. It has shifted to 65 percent development and 35 percent acquisition and if all goes according to plan, Bolzan hopes it will soon be a 50-50 split.

“We’ve acquired $600 million worth of deals in the last 24 months,” he says. “Our goal is to double our portfolio in the next five years. We have a lot of different partners and assets from Los Angeles to Cleveland to New York.”

For the Brooklyn purchase, Stark partnered with Sun Equity, located in the heart of New York City.

“We have the ability to bring in outside partners, which helps us with the capital necessary to close the deals,” Bolzan says. “We also bring in local partners who are in that market to partner with us so we can have a competitive advantage. Stark Enterprises is never going to be successful entering these markets if we don’t have the local knowledge in that specific market.”

The building in Brooklyn is a mixed-use, fully leased property. The primary tenant, Consolidated Edison Inc. of New York, occupies 238,000 out of 258,000 total square feet. Other tenants are CVS Pharmacy, JP Morgan Chase and United HealthCare Services.

“This move is our first of several planned acquisitions in New York,” Ezra says. “It’s consistent with our strategy of acquiring assets that allow us to unlock hidden value in urban locations that have long-term opportunistic upsides.”

He says Ohio has been a valuable proving ground for Stark’s foray into the Big Apple.

“The cap rate’s valuation of properties is pretty flat in Ohio compared to New York,” Ezra says. “I would argue that to create a multi-billion-dollar portfolio in the Midwest is a much more challenging endeavor than in New York. Yes, New York has many sophisticated players, but the fact is if you can succeed in the Midwest, it actually sharpens the skill set and enables you to have that sophistication to be able to compete in the New York marketplace.”

How to reach: Stark Enterprises, www.starkenterprises.com

BDO’s Bob Littman

As one of the founders of SS&G and now managing partner of BDO’s Akron office, Bob Littman has seen a lot of changes in the dealmaking landscape across Northeast Ohio. “With the advent of the access of capital with private equity, there is just so many more ways now to exit businesses,” he notes.

We sat down with Littman to talk about being ready to act, finding the right partner and how options have changed for dealmakers over the years. What follows is a transcript of the above video, edited for readability.

 

Be ready to act

One of the things that’s interesting through my years of experience is that timing is everything they say in life, but timing doesn’t always correlate with best value or highest price for some of these privately held business owners. They’re so attached to the businesses that it’s a difficult decision to make. And I always say one day, they wake up and they say it’s time to sell the business and it may or may not be the time when they’re going to generate the greatest value or the most dollars from a transaction. But it’s important, very important, for them to understand the process so when they are ready, they know what steps it’s going to take — and they know what steps and how it’s going to go.

Find the right partner

I think it’s very, very important to research and understand the different options you have. I mean, finding the right partner is imperative. It’s very, very important. It’s important for the success of the business going forward. It’s important for the stability of the workforce. You want the right partner. Making sure that you have the right advisers and the right resources to help you find the right partner is very important to business owners.

An abundance of options

I look back at my career — I’ve been doing this for 30 years plus. Thirty years ago, in these privately held businesses, the succession planning was all about the next generation. So from my perspective the succession planning was, well we need to find a young accountant that can deal with the succession plan of the business owner passing it down to a child. It was just known that the business — normally succession planning was to go down the generation. Fast-forward to today and I almost call it like the death of the family business. With the advent of the access of capital with private equity, there is just so many more ways now to exit businesses. The whole concept of passing the business down to the next generation is no longer the first option anymore because there’s so much access to capital and so many more buyers out there. Twenty-five years ago, 30 years ago, you just didn’t have the different options to sell your business.