Prepare now for impacts of new tax bill on middle-market businesses

By James S. Cassel

While many hope the new tax bill will stimulate the economy and bring faster GDP growth, we must consider whether it will indeed benefit us to speed growth from where we are today, or to experience a longer period of extended slower growth. Will the stimulus cause the economy to overheat and therefore bring us closer to the next recession? Are we better off as the tortoise or the hare? Fact is, middle-market business owners would be wise to prepare for both scenarios.

Since we are not currently in a recession and we have had steady, slow growth for almost 10 years, it is not clear that we need the stimulus this bill is supposed to bring. If we overheat, the Federal Reserve will likely pull back by raising interest rates faster to slow the economy. Rapid growth could cause inflation, because of a shortage of labor in today’s already tight employment market, among other things. Would that mean the Fed needs to raise rates faster (many already predict three quarter point interest hikes in 2018) and push us closer to the next recession, or are we better off with slow, sustained growth? Slow, sustained growth over the long term may be more beneficial to individuals and middle-market businesses.

Based on our experience working with middle-market business owners in all types of economic cycles, here is some general guidance to help your business decisions this year:

Hiring. You should be very cautious and not be overly exuberant when hiring because adding too many full-time employees too fast could put you at risk of having to fire those people just as fast when things slow down or your projections are not met. In the last recession, employers who hired in 2006 had to fire fast in 2008. Those who didn’t react quickly enough may not have survived. The key is to remain quick and nimble, and always hire people for the right reasons at the right times. You may want to start by hiring temporary help or part-time employees with the idea of converting them to full-time if growth continues.

Capital expenditures and real estate. When it comes to your capital expenditures, you must be careful to not overexpand. With real estate, you must be flexible. Consider solutions like WeWork or Regus shared office spaces to avoid long-term real estate commitments, which have proved to destroy many companies. Beginning in late 2000, large real estate commitments doomed companies when the internet bubble burst.

Expenses. You must continuously monitor your expenses and evaluate your medium- and long-term commitments to ensure you have flexibility. You want to continue to keep a strong balance sheet, being cautious with your commitments for borrowing. Particularly during the next year or two with the continuation of the growth of 2017, there is an expectation that interest rates will continue to rise, increasing borrowing costs.

Taxes. While some will get an increase in their taxes, the bulk of the tax relief will go to the wealthiest individuals and businesses, and thus will, in all likelihood, be saved rather than spent. In the case of companies, it will probably be used for dividends or stock buybacks, with limited increases to employee compensation where required to retain talent. Some of the benefits from this tax cut could be very short-lived, and as the bill exists today, individual tax benefits are not permanent.

It will be interesting to see what happens to economic growth with the new tax law over an extended time, because depending on which economist you listen to, forecasts vary from short-term blips in growth to long-term, extended growth. Some of the benefit will be offset by the misguided immigration policy which, as we deport workers, reduces the pool of potential employees. At the same time, in today’s economy that is near full employment, our immigration policy also reduces the pool of consumers who are spending money and in many cases paying taxes, decreasing GDP growth.

Without a doubt, exercising caution and preparing for both outcomes can help protect your best interest in any of these scenarios.


James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email at or via LinkedIn at

Click here to view original article.

Bad hire? Fast fire!

By James S. Cassel

Imagine: You hire a new employee but after a few weeks, you realize you made a bad choice. What to do?

Whether the problem is competence or chemistry, or anything else in between, the best advice is to be decisive and act — fast. Some business owners hesitate to pull the trigger because they do not want to admit they made a mistake. Unfortunately, the mistake magnifies with time and does not get better. It is OK to admit you made a mistake in hiring someone. Not terminating sooner rather than later is a bigger mistake.

Firing employees can be difficult for many reasons. As Warren Buffett said: “It’s pure agony, and I usually postpone it and suck my thumb and do all kinds of other things before I finally carry it out.”

Regardless, it must be done. As many of my clients have told me over the years, when you keep around a bad hire or employee it only gets worse the longer you retain them. Moreover, when you terminate a senior-level hire, such as a CEO, and you bring back a former CEO on an interim basis, most of the time that interim CEO will find things worse than they were when he or she left. If things were the same, then you probably would have kept the new hire.

Former General Electric Co. CEO Jack Welch — distinguished as one of history’s most famous managers, and noted for turning the struggling GE into a global giant during his 20-year tenure — was not called “Neutron Jack” for no reason. Indeed, he was known for his aggressive approach to categorizing and promptly terminating employees he ranked in the bottom 10 percent of his workforce, encouraging leaders to automatically fire their lowest performers as part of an annual corporate improvement process.

As part of his “rank and yank” system, managers were asked to group all team members into A, B, and C categories: the top 20 percent, the middle 70 percent, and bottom 10 percent. According to Welch, the middle should be coached and groomed to move up to the ranks of the top 20 percent. The bottom 10 percent, according to Welch, had to go.

Welch innately understood what many business owners neglect to realize: Keeping around poor performers becomes a major drain on your company, costing you money, time and energy, not to mention morale. It also makes things worse for the bad hire. I tell you this from experience.

So, how long should you wait before pulling the trigger? There is no cookie-cutter time line, and you should do it as soon as you realize it.

However, while it is never too “soon” to fire a bad apple, it should not come as a surprise to the person being fired. As Welch said, they should have had an opportunity to hear and respond to feedback. Make sure your employees have well-defined job descriptions and expectations, so they know what is required for success and can minimize the likelihood of failing.

When firing someone, the key is to take ownership of your hiring mistake and implement the right strategy to reposition your company. It is always good to consult with human resources specialists and labor attorneys.

As it relates to high-level terminations, communicate properly with your internal (employees) and external (clients/customers, vendors, partners, etc.) stakeholders. Provide reassurances the company is on track and will continue moving forward as planned. Also, identify what lessons can be learned to avoid the same problem with the next hire.

Bad hires or bad employees are part and parcel of doing business, for any company in any industry. We all make mistakes. Business owners who take timely, decisive action are protecting the best interests of all parties involved — including the bad hire, who is now free to find employment somewhere that he or she will be a better fit.


James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email at or via LinkedIn at

Click here to view original article.

Why more banks are launching IPOs

By Jackie Stewart

A bullish outlook on the financial sector encouraged more banks to go public this year.

A number of banks were eager to take advantage of investor optimism after last year’s presidential election. Several had compelling stories built around high flying niches, while others were looking to provide liquidity for investors or create a currency for acquisitions.

Eleven banks have held initial public offerings this year, excluding mutual conversions, or almost double the number that took place in 2016, based on data from Sandler O’Neill. Though down from the 15 IPOs conducted in 2014, a year when post crisis investors pursued exit strategies, momentum could continue if bank stocks remain hot.

“I think the stock market is a factor, but also which banks will have a good earnings growth story,” said Vincent Hui, a senior director at Cornerstone Advisors who oversees the firm’s risk management and M&A practices. “People will buy into you if you have a good earnings growth story. But we will have some headwinds.”

The KBW Nasdaq bank stock index is up about 16% this year, which has spurred more investors to pump more money into bank stocks, industry experts said.

Banks also have cleaner balance sheets and stronger operations compared to the post crisis years, said Brian Sterling, co head of investment banking at Sandler O’Neill.

“If you put together good stories, you’ll get increased activity,” Sterling added. “I do think you have some unusual business models [of banks that have gone public] and different approaches with good management teams.”

Banks with unique business models are also appealing to investors.

Esquire Financial looked at the IPOs at Triumph Bancorp in Dallas and Live Oak Bancshares in Wilmington, N.C., as it was preparing to go public, said Andrew Sagliocca, the Jericho, N.Y., company’s president and CEO.

Triumph, which focuses on factoring and other nontraditional businesses, held its IPO in 2014; Live Oak, a major small business lender and technology innovator, went public the following year. Triumph’s stock is up more than 25% this year, while Live Oak’s shares have increased by roughly 35%.

Executives and directors at Esquire, which has a specialization in offering services to law firms, began mulling an IPO in early 2016 to create liquidity for shareholders and allow employees to take an ownership stake in the company. A publicly traded stock also allows the company to access capital markets more efficiently, Sagliocca said.

“We were in a true inflection point,” Sagliocca added. “There were a lot of institutional investors that wanted to invest in a unique business model. The market conditions were stronger than in the past.”

An increasing number of banks with less than $1 billion in assets are bucking conventional wisdom by going public, said Rory McKinney, managing director and head of investment banking at D.A. Davidson. Such institutions can make the leap if they have strong management teams and returns that are beating out larger rivals.

“Investors are always looking to invest in different types of new stories,” McKinney said. “There is interest in the sector as a whole … because of the bright lights economically across the country, tax reform, reg relief. Those things come into play from an investor perspective in connection with an IPO.”

Esquire, with $480 million in assets, was familiar with the view that banks of its size may be too small to go public, Sagliocca said. Investors, however, seemed more concerned about the company’s business model and performance metrics.

Esquire’s stock price has increased by more than 25% since its June IPO.

“The proof is we have been successful,” Sagliocca said. “Based on the stock price, there’s interest I would assume.”

M&A is another factor. Aspiring acquirers can benefit from having a stock to offer a target.

“Banks need a currency to do deals,” Tom Michaud, president and CEO of Keefe, Bruyette & Woods, said during a recent panel discussion at the University of Mississippi. “Cash can’t compete with a bank that can offer stock trading at 2.5x tangible book.”

While there is an expectation that IPO activity can remain steady next year, some constraints exist. The number of banks is down 7% from the end of 2015, providing fewer candidates for public offerings. At the same time, there are only so many management teams that have want to go public and have a constructive use for extra capital.

Earnings stories could also be challenged for executive teams that relied heavily on cost cutting to boost the bottom line, Hui said. Some institutions, which have run into concentration limits in areas such as commercial real estate, could face challenges as they try to diversify their portfolios.

Investors could also turn bearish based on a domestic or international shock, noted James Cassel, chairman and co founder of investment bank Cassel Salpeter. “There’s no reason next year shouldn’t be good for bank IPOs — but with an asterisk,” he said.

“My view in general is that time is never your friend with an IPO because so many things are outside of your control,” Cassel added. “If you want to raise capital in the third quarter of next year, you might want to have your head examined as to why not now.”

Click here to view original article.

Prepare your middle-market business now for future storms

By James S. Cassel

In light of the devastation following the recent hurricanes, it is important to evaluate what happened in Puerto Rico, Texas and even Miami, and consider how our middle-market businesses would have fared if a major hurricane, like Irma or Harvey, had been a direct hit on South Florida.

We fortunately dodged a bullet this time, and the damage to South Florida was nothing compared to what it would have been if we had taken a direct hit. Without a doubt, companies must have the right emergency contingency plans in place to protect businesses and people before, during, and after a storm. With proper planning, we can minimize the damage to our business operations and best protect our property and our relationships with customers, employees and community. We need to be able to expedite the return to normal operations.

So, how can we achieve this? Planning. While the appropriate steps may vary depending on your industry and the type of company you own, in general these best practices can be helpful:

Review your insurance policies now, before an impending storm. Get an expert to assist you so you truly understand your coverage. When a storm approaches, it is generally too late to make changes.

Have a written contingency plan and a preparedness checklist to put in place five days in advance of the storm. The Internet is full of many good resources like this one, and I recommend combining ideas from several resources and creating a customized checklist for your company. Additionally, it is important to identify appropriate protocols for protecting and securing your valuables, including everything from documents to property. Assign specific roles and responsibilities and train employees to execute the plan.

As the storm approaches, refresh your recollection of your insurance policies. Keep printed copies safely stored as well as digital copies.

Negotiate upfront with key suppliers to ensure that you have an appropriate system for receiving key materials and with fair pricing in place. You can ensure better outcomes and lower pricing by negotiating ahead of time, well before hurricane season. Also, make arrangements for alternate sites for storing products or running operations in the event that yours becomes unusable.

Ensure that you have adequate technology to communicate with the necessary team members and clients. Cellular phones might not work. Consider satellite phones.

Identify key team members to help ensure your company has adequate power generation (i.e. a generator) and key employees have access to power in order to keep the business running during outages. Have a secondary location(s) outside the market where you can move key people to continue operations.

Develop a post-storm plan, including assigned tasks, and train your employees to follow it. The plan should first assess the condition of your work force. Conduct practice drills — well in advance, and not just days before the storm. Make sure you do this regularly so that any new employees are properly trained.

Arrange for you and your key employees to have enough fuel, food and cash on hand. You would be surprised how many people fail to properly prepare for storms and are caught without basic necessities for a period of days. ATMs may not work.

While we cannot say for certain when it will happen, there is no doubt that, at some point, South Florida will get hit by a “big one.” Although it can be time- consuming to plan for future storms, it is a fact that when a major one strikes, the right planning can have a big impact on our businesses. Those who plan will protect their best interests and potentially gain an advantage over any competitors who, instead, opt to focus on their day-to-day business operations.


James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email at or via LinkedIn at

Click here to view original article.

Recruit, train and mentor to create a diverse workforce

By James S. Cassel

Without a doubt, companies need a diverse workforce to reflect the population that defines the United States and makes us strong. As discussed in my last column, while most middle-market business owners recognize the importance of a diverse workforce, many still struggle to find the right strategy for recruiting and retaining the right team members. This month’s column will provide practical guidance for creating a diverse workforce and the culturally sensitive atmosphere necessary to retain it.

Why is diversity so important? Diversity brings together people of varied talents, skills, experiences, and perspectives, significantly expanding a team’s capabilities and fostering innovation by increasing access to new ideas. Representing a variety of nationalities and ethnic backgrounds can also make companies more relatable to a broader customer and client base and enable them to work in new global markets. A diverse client or customer base requires a diverse workforce. Workforce diversity also has proved to enhance employee and client satisfaction, leading to greater retention.

So how can you create a diverse workforce? While you should always hire the best candidates for job openings and internships based on their qualifications, here is some helpful guidance to keep in mind:

Recruitment: Expand your recruitment and think outside the box. Contact ethnic clubs on college campuses to find good candidates. Develop a strategy for speaking at events and positioning your company in front of a diverse audience. Practice what you preach. An ethnically diverse recruiting force helps you attract more candidates. When using headhunters, indicate that you seek qualified candidates with language and cultural diversity, and do not assume that someone bilingual speaks English and Spanish. Years ago, a former employer in Miami assumed my wife spoke Spanish when my wife said she was bilingual, and was surprised to learn she was referring at the time to Russian.

Training and education: Knowing it might not be possible to hire the strongest candidates with the right experience and skills off the street, you should develop strong training and education programs. Hire younger employees with potential and train and empower them to grow into the desired roles. Do not only look for talent in the big-name universities. Community colleges are a great place to look for talented candidates. Some of Miami’s most prominent business and community leaders graduated from Miami Dade College, for instance.

Mentoring: Mentoring is key to helping cultivate diverse talent. A great strategy is to pair up people. However, mentoring should not only be delegated to your staff — it should extend to you as the owner as well as other senior management. Make sure to personally invest time in mentoring and meet routinely with your employees. This is critical if you seek to cultivate a mentoring-driven corporate culture and instill mentoring in your company’s DNA.

Compensation: Pay people equally and give them the same opportunities for advancement.

HR practices: Advertise job openings broadly, and take advantage of word-of- mouth and referrals from employees, clients and community partners, as well as various websites like and Make sure your human resources department is properly trained and has the right policies — and perspective — to ensure your diverse employees have the support and working environment they need for success. Because all people are created equal, all people should have equal opportunity. Provide diversity-focused events to elevate everyone’s understanding of other cultures as well as an open forum for folks to communicate and build better relationships with those of different backgrounds.

All of this takes a conscientious effort on your company’s part and starts at the top. Considering our country’s labor challenges and uncertainties surrounding its immigration policies, it is not likely to get any easier to establish a diverse workforce. But we should never, ever give up. The future of our middle market and our country depends on it.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email at or via LinkedIn at

Click here to view original article.

Diversity is critical for business success

By James S. Cassel

As Stephen R. Covey famously said, “Strength lies in differences, not in similarities.”

While most middle-market business owners recognize the importance of having a diverse workforce, many are still struggling to find the right strategy for creating the right team. As a nation, we need a diverse workforce to adequately reflect the diverse population that makes us strong. Considering our country’s current labor challenges and current uncertainties surrounding our immigration policies, we do not expect it to get much easier to achieve this any time soon. However, it is not impossible and we should not stop trying.

This week, I will share my perspective on the challenges and opportunities of implementing workforce diversity. Next month, I will provide some practical guidance to help develop a diverse workforce within your company.

First, it is important to understand the definition of a diverse company. Diversity is about more than just race and ethnicity. A truly diverse workplace is comprised of employees with different characteristics including religious

and political beliefs, genders, socioeconomic backgrounds, sexual orientation, and geographic (foreign and domestic) locations. Successful companies are those that have diversity in their DNA — not those that perceive diversity as an optional bonus.

Why is diversity critical to growth and prosperity? Among other things, it creates a culture of ideation and innovation, brings varied values, perspectives and views to the table, and gives companies a competitive advantage that breeds success. The benefits of diversity have been validated consistently in research by the nation’s leading institutions. Forbes studies, including “Fostering Innovation Through a Diverse Workforce,” have identified workforce diversity and inclusion as key drivers of innovation and growth. McKinsey studies have found that companies with more diverse top teams are also higher financial performers. Harvard Business School has found that multicultural networks fuel more creativity. The list goes on.

Increasingly, corporate and individual clients are making diversity part of their key criteria when selecting companies to hire. Many of the larger companies have extensive diversity programs to cultivate diverse talent, including recruitment, training and retention. For many, these programs are proving quite effective.

However, companies in industries like technology, which have historically been more skewed toward white, Indian and Asian males, are having a particularly difficult time achieving their diversity goals in some job categories. In part, this stems from a myriad of reasons beyond their control, including the fact that many of the diverse candidates they would like to employ were raised in geographies where they had little exposure to these career options, or limited access to the quality early education that can be important in shaping technology career paths. It may not be so easy to diversify your ethnic pool if the quality and training of the talent available in the hiring process is coming predominantly from limited groups.

That said, diversification does not mean lowering your standards to hire less- qualified candidates. While you should continue to hire the best candidates based on their qualifications, you also should commit to training and education to help cultivate more diverse talent.

South Florida might be one of the most diverse places in the United States. So what can you do if the labor pool of diverse candidates in your industry is not as ideally qualified as you would like? Unfortunately, there is no purple pill or one-size-fits-all approach. It requires developing a customized strategy for your business, rolling up your sleeves and doing some work. In my next column, I will discuss how.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email
at or via LinkedIn at His website is:

Click here to view original article.

As unemployment drops, build a bench to keep your business on track

By James S. Cassel

As unemployment continues to drop, how can you attract and retain the quality employees you need for continued operations and growth? Already, middle-market business owners are complaining of challenges finding skilled people — ranging from top brass to rank and file. Without them, growth slows.

If you are having a hard time with staffing, you need to invest in solid recruiting, training and mentorship programs to cultivate talent from interns and trainees while continuing to promote from within. This will enable you to build a bench of up-and-comers who will grow to become tomorrow’s superstars. But the work is never finished. Once you have elevated them, you will have to find ways to keep them motivated so you do not lose them to competitors.

Following are practical tips based on our experience helping middle-market business owners meet their talent needs.

▪ Create a culture of learning: Job training, education, apprenticeships and internship programs are key. While President Donald Trump has talked about this a lot, he has not done much to advance this in any meaningful way.

▪ Locally, if you are expanding your business, you might turn to The Beacon Council or other agencies for assistance finding money available for job training as well as incentives for hiring additional personnel. An important point to note related to internships: Mind the laws and how any changes could impact you. Currently, interns must receive college credit or get paid for their work. However, there is some talk about loosening the legal requirements. Last thing you want is a problem.

▪ Hire the right interns and apprentices: Carefully screen for those with potential to eventually become full-time employees. There are tests. If your industry requires specialized knowledge, such as manufacturing or logistics, you will need to be open to recruiting folks with minimal practical knowledge. Just make sure you hire those with a demonstrated appetite to learn.

Focus on interns and apprentices who have intelligence, a good work ethic and the appropriate personalities for your company culture. Look for those who are eager, enthusiastic, willing to work hard and go the extra mile. As an added benefit, this approach enables you to “try before you buy” and minimize the likelihood of hiring mistakes.

▪ Provide compelling reasons to join your company: Beyond offering a competitive compensation package and positive workplace environment, you must roll up your sleeves and help train your hires.

Properly onboard them, meet with them regularly, and educate them. Just as important, develop a relationship with them. Give them mentors and assign them someone to shadow. You cannot expect a newly hired individual to magically learn through osmosis and start bringing value to your company on day one.

▪ Institutionalize your operations and training: Corporate “how-to” manuals with step-by-step instructions for performing job tasks, including everything from procedures for dealing with sales prospects to procedures for operating machines and equipment, can help train new employees and increase the effectiveness of existing ones.

▪ Keep an eye on available U.S. visa programs. This evolving area has been a great resource when quality talent has not been available in the U.S.

▪ Promote your company as a great place to work: Pursue media coverage, awards and other opportunities to showcase your work environment and business success. This can help attract new employees, including experienced folks who have been out of the workforce for a while, and also build morale to retain existing employees. If you build it, they will come.

Building a strong team takes time and effort, but it can bring significant value in the near and long term while giving you a significant edge over your competitors. It may be the difference between growth and stagnation.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. He may be reached via email at or via LinkedIn at

Click here to view original article.

Middle-market business owners should learn to take real vacations

By James S. Cassel

Last month, I wrote about the virtues of taking a gap year or a gap period. However, I recognize that not everybody might be able to do that right away or while still working. So, this month I am writing about the second-best option: taking a real vacation — i.e., time off.

Although it may sound impossible or scary to — get ready for this — disconnect by keeping your phone and all your devices turned off, it is healthy and important for your well-being as well as that of your family and your business.

What does it mean to take a real vacation? Many middle-market business owners tend to forget. I qualify as one.

We all know the reasons this is important: mental and physical health benefits, family benefits, reflection and relaxation time, the list goes on. But we end up working more than we should on our vacations out of fear of losing customers or business opportunities.

Fact is, depending on your industry, taking vacations can lead to new client opportunities. I know many people who have met some of their best clients or customers while on vacation or otherwise pursuing personal interests, such as golf or photography. Taking a vacation can also provide a good opportunity to test your succession plan.

In the financial-services industries, many of the big companies have policies requiring certain personnel to take off for two consecutive weeks without access to email. In part, they do this for security reasons in the highly regulated, closely scrutinized industries. Maybe this model should be considered across other industries for well-being not only for security reasons.

How do you check out without hurting your business? Following is some practical guidance.

  • Find the best time. We all have times of year when our businesses are slower than others.
  • Plan for your time out of the office. As best you can, handle items that require your personal attention before you depart. Determine who will take your place and have an internal system to ensure nothing slips through the cracks.
  • Ask your team to manage issues independently and only contact you if absolutely necessary, such as a true emergency.
  • Decide whether to tell your clients in advance that you will be out of reach. Often, the simple act of giving clients advance notice and telling them who to contact in your absence can minimize the likelihood of any issues. It is best practice to let them know.
  • Decide whether to have an “out of office” auto response message or whether you should automatically forward your emails to someone who will respond in your place and notify you in case of emergency.
  • If you cannot check out completely during your time away, you might consider allocating a limited time per day, let’s say one hour to checking your emails and responding to key items while delegating others. You might do this at the beginning or the end of the day. But you must stick to that, and keep your devices off the rest of the time.

I recognize this advice is easy to give but not as easy to follow. As I write this article, my office manager is offering to monitor her emails occasionally while she is on vacation, and I am not stopping her. I am not very good at practicing what I am championing, but I continue to try.

Life is all about balance. It all goes by too quickly. So, take the time to enjoy yourself, and you might find yourself — and your business — thriving more than you had imagined. Taking real time off gives you a change to reflect and plan. Use it!

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle- market companies. He may be reached via email
at or via LinkedIn at

Click here to view original article.

Cooper’s Take: What Is Slowing the Pace of Tech Take-Private Deals?

By Laura Cooper

Although private-equity firms have money to spend, the well-performing public markets and desire to exercise price discipline may be keeping them from splurging on take-private technology deals.

A report by investment bank Cassel Salpeter & Co., which focuses on initial public offerings and public company takeovers, notes there were 20 public company acquisitions for both private-equity and corporate buyers for the first half of 2017, compared with 61 completed for all of 2016.

If deal making continues at the same pace, the figure also would represent a decrease from the 50 deals recorded by the bank for 2015.

Of the 20 deals closed so far this year, 18 of them were made by strategic buyers—only two were completed by private-equity managers.

Acquisitions of public companies overall have dropped because of a number of factors, including large megadeals in the space last year, according to the report. Among the deals are Dell Inc.’s acquisition of EMC Corp. and Microsoft Corp.’s purchase of LinkedIn Corp. As a result, a number of corporate buyers are on the sidelines digesting previous acquisitions.

The idea that some corporate buyers are resting after a banner year for acquisitions may have been good news for private-equity players if public markets weren’t performing as well as they have been. For even the biggest spenders, industry watchers have noted that no matter the size of the fund, private-equity firms have been doing due diligence and practicing discipline when it comes to pricing.

Although private equity seemingly has been exercising control when buying in the public market, three private firms led the report’s list of most active buyers of public companies for the three years ended June 30.

Siris Capital Group, Thoma Bravo and Vista Equity Partners topped the chart with five take-private deals apiece. They were followed by a slew of corporate buyers including Oracle Corp., which made four acquisitions of public companies in the same period.

Although midyear indications suggest total 2017 take-privates could decrease compared with previous years, there is still time for private-equity investors
to put money to work in the public market—and potentially reap rewards that could result from bullish bets.

Click here to view original article.

Avery Moves Into Medicine ACQUISITION: Label maker buys wound and skincare company.

By Iris Lee Staff Reporter

Avery Dennison Corp. has taken a step into new territory with its acquisition last month of Finesse Medical Ltd., an Ireland based manufacturer of wound and skincare products.

Glendale based Avery built its reputation on self adhesive labels and pressure sensitive materials manufacturing. But it has pursued an acquisition strategy to create its industrial and health care materials division. Finesse Medical will become part of Vancive Medical Technologies, the medical solutions arm of the division.

“Overall, the acquisition will allow us to expand our product portfolio and manufacturing services for health care OEMs,” said Kirsten Newquist, general manager of Vancive Medical Technologies. “Finesse complements our existing production capabilities with its converting, packaging and regulatory management expertise. It will also broaden our portfolio in wound care with its silicone gels, foams and superabsorbent materials.”

New but familiar

Avery did not disclose the price of the acquisition, but it said Finesse Medical generated more than 15 million euros, or about $16.7million, in revenue last year. This will be a significant addition to Vancive Medical, which has hovered around $70 million in annual revenue in the last few years.

Finesse currently manufactures a range of products, including polyurethane and silicone foam dressings used for burns and ulcers. In skincare, the company manufactures creams and gels to treat skin conditions that may develop with the frequent use of adhesives.

But perhaps what most attracted Avery was Finesse’s manufacturing services. The company provides controlled environment production services for other companies that are trying to outsource product design and manufacturing development services.

Finesse has eight clean room facilities in Ireland that are ISO certified, where they can provide subcontracted manufacturing services like bottle filling and sterilization of products. The company can support product development from start to finish, starting with material sourcing and biocompatibility testing to sterile packaging and CE marking, a mandatory conformity mark for products sold in Europe.

James Cassel, co founder of Cassel Salpeter & Co. investment bank in Miami, said when companies like Avery Dennison venture into a new market, they do it cautiously, and do not stray too far from what they already know.

“Products they are getting into are in many aspects similar to their core business,” said Cassel. “From a due diligence standpoint, they also have experts on staff that can go in and evaluate a good buying opportunity.”

Overall, Cassel believes Avery Dennison is making a long term play into the new market. “They are an established company that’s been around for 80 years. They are an adhesive company that has become a packaging company,” said Cassel. “If you think about it, health care is such a growing area, it’s a natural transition.”

Veronica Lau, the director of Glendale Memorial Wound Care Center, agrees that this is a rapidly growing market.

“We are seeing a dramatic increase in all areas of wound care due to increasing diabetic and obese populations,” she said. “The aging population also deals with lots of trauma that bring them here.”

According to Lau, about 30 percent of her operation costs go into purchasing materials for the wound care center.

However, a growing industry also means fierce competition. Lau said. Her center has its own wound care council that meets with vendors to find out what products are in the market.

“I heard there’s something like 25 new dressings that are introduced every day,” said Lau. “But the market is such that materials are being used not only in outpatient centers like ours but for in patient and other providers.”

Internal organization

At first glance, the health care materials sector seems out of place at Avery. After all, the industrial and healthcare materials division only accounts for 7 percent of the company’s $6.1 billion of annual revenue. The rest is generated by the company’s best known products labels, price tags, consumer packaging and logistics tags for retailers.

Although health care represents a new application, Avery’s tried and true practices and strategies align well with industry. It’s an industrial supplier, selling mostly to other manufacturers rather than consumers. Also, the company works with medical clients to develop products, a system Avery is well familiar with in its other industrial sectors.

For example, earlier this month Avery opened a research lab in Santa Clara to develop packaging in conjunction with electronics manufacturers. And in the medical sector, Vancive worked with manufacturers to develop a blended antimicrobial material spread onto an adhesive to make a thin film dressing.

The company’s industrial and healthcare materials division sector, created at the end of last year, looks like a hodge podge. It includes performance tapes, fasteners, internal adhesives and now health care businesses.

Avery’s last acquisition before Finesse was Yongle Tape Company Ltd., a manufacturer of specialty industrial tapes in China. Avery explained in the latest earnings filing that while the purchase price was set at $190 million, the agreement includes additional opportunities for more to be paid if the business hits certain performance targets.

In a recent analyst call, Avery’s industrial and healthcare materials General Manager Mike Johansen explained the thinking behind the creation of the new division.

“This business is really an application specified function materials business that serves across the different business, particularly markets such as automotive and electronics,” he said. “They also get very heavily specified by either the OEMs or their tier ones or their development partners.”

Acquisition risks

Cassel said risks accompany any merger or acquisition.

“Sometimes when you are going into a new area, you can end up paying a high multiple,” he noted. “Integration can also be an issue. But looking at their history, they’ve done venture type of investing so, that lessens their risks.”

At the analysts meeting, Avery’s Johansen said there were more acquisitions on the way for the company.

“We’re investing heavily in terms of our internal capabilities and on our expansion globally,” he said. “But also, we’re looking to fill a pipeline of acquisitions that we think are actually going to accelerate our position in these markets.”

Cassel said for large industrial companies, it’s hard to grow organically because they are limited to the rate at which the whole economy is growing. So, despite the fact that Avery Dennison has tons of internal resources, growing through acquisition makes more business sense.

“To take a good product and make it better is sometimes easier than doing it from scratch,” said Cassel. “You take a product and increase units and improve on it. You can expand that way.

“You have to see it as a bullseye in a target practice,” Cassel continued. “At the center of the target is the adhesives, but the company is now moving out to the concentric circles, not too far from what it does best.”

Click here to view original article.