Scott Cress Barnes Dennig 150 East Fourth Street Cincinnati, Ohio

Transcription

1 Manufacturing / Wholesale Distribution Roundtable

2 Private Capital Markets Scott Cress Barnes Dennig 150 East Fourth Street Cincinnati, Ohio

3 Today s Talk I. Private Capital Markets II. Middle Market Finance / Private Capital III. Transfer / Exit Channels IV. Private Company Value

4 What are the Private Capital Markets? The venues where private capital is raised and private equity interests are exchanged The world's biggest markets?

5 The Middle Market - Buyer Demand 8,000 Private equity groups (PEGs) in the US PEGs already own about 35,000 middle market companies. Most in the Middle-Middle and Upper Middle-Markets. Large Corporations cut or reduced R&D and organic expansion during the great Recession. Public Companies haven t grown employment organically in 20 years. All growth was through acquisition of Middle-Market companies.

6 The Middle Market - Seller Supply Indications of Seller activity: Largest demographic of Closely-Held business owners is between years old (in 2015). Earnings are returning to previous highs. Valuations are at all-time highs. Issues holding back Sellers: Many owners are risk-averse and comfortable with a lifestyle business. Most owners have their net-worth tied up in their business. Safe investment returns won t replace business earnings.

7 Cyclical Private Market Timing

8 II. Middle Market Finance / Private Capital

9 A Tale of Two Markets Public Markets (Wall St.) Use of a C corporation Value is established by a market Ready access to public capital markets Owners have limited liability Owners are well diversified Professional management Company has infinite life Liquid securities efficiently traded Profit maximization as a goal Private Markets (Main St.) Can be any type of entity (S, LLC, etc) Value is established at a point in time No access to public capital markets Owners have unlimited liability Owners have one primary asset Owner management Typical company life of one generation Illiquid securities inefficiently traded Personal wealth creation as goal

10 Pepperdine Private Capital Markets Survey Figure 1. Private Capital Market Required Rates of Return

11 III. Transfer / Exit Channels

12 Owner Transfer Motives Private owners want to: Create a family legacy Diversify estate See their baby thrive Change lifestyle Empower employees Benefit their community Maximize value (Is this always #1?)

13 Exit (Transfer) Channels Defined: the possible ways or methods to transfer a private business interest Motive selects a channel (e.g. Strategic Buyer, Financial Buyer or Related Buyer Channel) Transfer Channels determine the value Each channel rewards different Value Drivers

14 IV. Private Company Value

15 Professional Valuation Today Not done for a Buyer or Seller Compliance-oriented Historic and forensic Theoretical / Notional Measured with singular certainty Not useful in making investment and financing decision.

16 Basic Value Formula: PV (Benefit Risk Rate) = VALUE OR Benefit Stream times the Multiple (EBITDA times an acquisition multiple) What s the benefit stream? Different in each Transfer Channel, and with each Buyer What s the risk expectation (ROI)? Different in each Transfer Channel, and with each Buyer

17 Pepperdine Private Capital Markets Survey Median Deal Multiples by EBITDA Size

18 Scott Cress, CPA, CVA, CM&AA As a Senior Manager on the Barnes Dennig tax consulting team, Scott receives advanced training to remain abreast of all trends and changing regulations. His knowledge of the tax code and available credits and incentives is complemented by a thorough understanding of the various structuring options and a commitment to open communication and client service. He has helped clients in a wide variety of industries complete successful transactions and claim credits for employment and training, investments, manufacturing, development and renewable energy initiatives. Scott has spent the last 16 years analyzing a client s business operations and personal financial situation to provide sound advice to minimize tax burdens and complete successful transactions. His goal is to ensure that they clearly understand the underlying concepts of a strategic plan and the steps involved in implementation. He has experience, both in public accounting and the private sector, which gives him unique insight into his clients' operations and opportunities As a Certified Valuation Analyst (CVA) and Certified Merger & Acquisition Advisor (CM&AA) Scott has managed many transaction based engagements for corporations, partnerships and other closely held businesses for a wide variety of tax, valuation, M&A, litigation and financing needs scress@barnesdennig.com

19 Manufacturing / Wholesale Distribution Roundtable

20 Silverstone Capital Advisors Firm Overview About the Firm About the Firm: Silverstone Capital Advisors ( SCA ) offers a wide range of advisory and investment banking services to regional and national clients. In addition to merger and acquisition transactions (as both buy and sell-side advisors), SCA is actively engaged in capital formation, debt recapitalization, succession planning (with noteworthy expertise in management/shareholder buyouts) and capital and equity monetization strategic planning. Our clients are characteristically privately-held and middle-market and participating in numerous industries. From time to time, we have also been engaged by public companies to evaluate and advise on operating entity divestitures. SCA is exceptionally experienced in distressed M&A, work-out recapitalizations, UCC Article 9 and US Bankruptcy Code-based transactions. 600 Vine Street, Suite 1900 Cincinnati, Ohio SCA partners are advisors to, and directors of, several company and nonprofit boards. Silverstone Capital Advisors 600 Vine Street ~ Suite 1900 ~ Cincinnati, Ohio 45202

21 The Silverstone Team Team Member Bio Mark Greenberg Mark brings 30 years of senior executive operating and transaction expertise and experience to Silverstone Capital Advisors. He has been a group and division level senior executive and operating president of units in Fortune 500 companies and a CEO and Chairman of middle market and high growth, venture capital-backed companies, as well as an investment banker and restructuring and financial advisor serving middle market and financial institution clients nationwide. Mark A. Greenberg Managing Partner & Co-Owner mark@silverstoneadv.com As a principal investor, advisor, investment banker and transaction team member Mark has participated in more than 150 M&A and capital funding transactions in the last 30 years. These have included transactions involving units of Fortune 1000 companies, middle market companies and high growth venture funded businesses. Mark maintains an exceptionally busy advisory practice, advising and representing corporations, boards, company stakeholders, as well as financial institutions both regionally and nationally. In addition to representing and leading capital sourcing and M&A transactions for a wide range of clients, Mark s business valuation, management buyout and deal structuring expertise are in high demand by businesses, investors and financial institutions throughout the region and nationally. Mark also has significant experience in distressed situations, providing restructuring and bankruptcy related advisory services to both creditors and debtors within and outside of bankruptcy, including acting as investment banker of record in 363 sales under Chapter 11 bankruptcy. Mark serves on several company boards and is a board member of the Cincinnati Chapter of the Association for Corporate Growth. Mark speaks and writes on a range of business topics including transaction finance, business valuation, mergers and acquisitions, business strategy and economics. His articles appear in business journals and newspapers in the Midwest and nationally. Mark is a multiple degree magna cum laude graduate of Boston University. Silverstone Capital Advisors 600 Vine Street ~ Suite 1900 ~ Cincinnati, Ohio 45202

22 Four O Corporation Family Business Transition to RelaDyne March 3 rd,

23 Doug Oehler, Executive Vice President Doug Oehler is responsible for leading RelaDyne's distribution operations throughout all company locations across the US. In partnership with his peers in finance, sales, Field Reliability Management (FRM), and business development as well as with suppliers, he ensures that RelaDyne's product and service strategies are successfully implemented and that the appropriate human, financial, technological, informational, and material resources are available to deliver world-class customer service. Doug has more than 28 years of experience in the lubricant distribution business. He co-founded Oil Distributing Company in Cincinnati, Ohio, with his father in 1982 as a spin-off of Tresler Oil Company. During the company's inception, Doug served in a part-time sales role while completing his college degree, rising rapidly to positions as Sales Manager, Vice President, and General Manager after joining the company full-time. Since 1998, he served as the company's President, responsible for day-to-day business management, including sales, finance, and operations. He has also overseen the integration of many of the company's 14 acquisitions since Doug is currently serving on the Shell Oil Products US (SOPUS) council and is President of the Association of Independent Oil Distributors. He is also a member of the National Oil Recycling Association (NORA) and acts as a lubrication industry consultant for Gearson-Lehrman Group. In addition, he has completed numerous oil-related technical courses to enhance his knowledge of lubrication excellence. Along with these professional activities, he serves on the board of directors of Boy Scouts of America and is board chair for his church and local school. A graduate of the University of Cincinnati College of Business, Doug received a Bachelor of Business Administration in marketing. 23

24 Four O Corporation » Family Owned and Operated Business in Cincinnati» Close Out Products Business until Sept 1981» Four O Corporation Started Oil Distributing Division» Richard Oehler Chairman» Doug Oehler President» Dan Oehler VP Sales» Cathy Carnessali Equipment / Environmental Manager» Deb Reinert CFO» Lori Oehler CIO» 120 total employees» Industry Changes / Family Dynamics / Top of our Game 24

25 Who was RelaDyne? The Leading Provider of Equipment Reliability Products & Services Formed in November, 2010 Four successful businesses 324+ employees / 20 locations / 8 states 225+ years of experience in the lubricant products and related equipment reliability services industry Industrial, Commercial and Automotive markets Central corridor of the United States / 50 percent of the U.S. lubricant market Two Lines of Business Distribution Reliability Services Backed by AEA Investors New York City based firm who manages funds that have approximately $5 billion of invested and committed capital.

26 Who is RelaDyne? The Leading Provider of Equipment Reliability Products & Services Formed in November, 2010 Built upon a solid foundation of four successful businesses 600+ employees in 30+ locations servicing customers in 40 states and 22 nations Over 500+ years of experience in the lubricant products and related equipment reliability services industry Support all classes of trade within the industrial, commercial and automotive markets in the US Strategically located within the central corridor of the United States, an area that accounts for approximately 50 percent of the U.S. lubricant market. Backed by AEA Investors New York City based firm founded in 1968 who manages funds that have approximately $6 billion of invested and committed capital 26

27 Jim Lewis, President Saturday Knight Ltd. started in the bath fashion industry in 1975 with vinyl shower curtains. In 1977 retailers encouraged Saturday Knight to duplicate the excitement of the vinyl line with fabric shower curtains. In 1980, in order to better serve our retail partners and the consumer, Saturday Knight decided to offer the total coordinated look to retailers. Although common now, it was a leap of faith to merchandising the bath, which included shower curtains, embellished towels, accessories and rugs. There were many challenges, including color matching of different textures from different countries, new point of sale packaging, and a totally new method of merchandising the coordinate at the retail level. Saturday Knight has always prided itself on providing the best in design, delivery and customer service to the finest retailers in the world. In 2002 we took the opportunity to add window curtains to our fashion offering. Soft window treatment is now an important part of our retail business. Saturday Knight's corporate headquarters and 500,000 square foot distribution center are located in Amberley Village, Ohio. We also maintain a New York City showroom for our retail partners. Today from our 50 acre campus in the greater Cincinnati area, Saturday Knight sells to every major retailer in the US. After 35 years our design and marketing expertise, along with our global sourcing abilities, make us the leading designer of quality bath products and window curtains in the world.

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