Cassel Salpeter & Co. Announces Three Promotions

MIAMI – January 26, 2016 – Cassel Salpeter & Co., a middle-market investment banking firm providing merger, acquisition, divestiture and corporate finance services, today announced three promotions: Philip Cassel and Chris Mansueto have been named vice president, and Laura Salpeter has been named associate.

“We are pleased to promote Phil, Chris and Laura as part of our commitment to cultivating the industry’s top talent and continuing to meet a growing client demand for our services,” said James S. Cassel, chairman and co-founder.

Cassel, with experience in consulting and private equity, provides assistance across all areas of the firm, from financial analysis to advisory services. Primarily, he guides clients through M&A and capital raise efforts and supports the firm’s fairness opinion advisory work.

Prior to joining Cassel Salpeter, Cassel worked for Rialto Capital, a real estate private equity fund. He also worked in the Turnaround and Restructuring Group at Alvarez & Marsal. Cassel earned a bachelor’s degree in mathematics from the Massachusetts Institute of Technology, in Cambridge, MA.

Mansueto has extensive experience in the valuation of companies, securities and intangible assets for financial reporting, tax planning, and internal planning
purposes. He has completed purchase price allocations, impairment testing valuations, derivative securities valuations, and equity valuations under complex capital structures.

He has earned the right to use the Chartered Financial Analyst designation offered by the CFA Institute as well as the Accredited Senior Appraiser designation in the area of business valuation offered by the American Society of Appraisers. Mansueto earned a master’s in business administration from Rice University, in Houston, and a bachelor’s degree from George Mason University, in Fairfax, VA.

Salpeter draws on her experience to provide thorough, efficient analysis of complex financial transactions. In this role, she contributes to the firm’s merger and acquisitions, fairness and solvency opinions, restructuring, and financial advisory services.

Salpeter is a member of both The Florida Bar and the District of Columbia Bar. Prior to joining Cassel Salpeter, she worked at Conrad & Scherer and Ephraim Roy Hess. She also clerked at the 17th Judicial Circuit Court of Florida in Broward County for the Honorable Judge Paul Backman. Salpeter received her master’s and bachelor’s degrees from the University of Central Florida, in Orlando, FL, and her Juris Doctor from Nova Southeastern University, in Fort Lauderdale, FL.

About Cassel Salpeter & Co.

Cassel Salpeter & Co. is an independent investment banking firm that provides advice to middle market and emerging growth companies in the U.S. and worldwide. Together, the firm’s professionals have more than 50 years of experience providing private and public companies with a broad spectrum of investment banking and financial advisory services, including: mergers and acquisitions; equity and debt capital raises; fairness and solvency opinions; valuations; and restructurings, such as 363 sales and plans of reorganization. Co-founded by James Cassel and Scott Salpeter, the firm provides objective, unbiased, results-focused services that clients need to achieve their goals. Personally involved at every stage of all engagements, the firm’s senior partners have forged relationships and completed hundreds of transactions and assignments nationwide. The firm’s headquarters are in Miami. Member FINRA and SIPC. More information is available at www.CasselSalpeter.com

Mergermania: Why Mergers Could Make for Big Winners in 2016

By: Lou Carlozo
January 19, 2016

Even if you’re watching that resolution to lose 10 pounds drown in a sea of ice cream, you can still hold out hope that 2016 will be a year of transformation. And so it is for a host of companies, bloated or cash- starved, trying to win back the adoring gazes of eager investors.

“More than half of mid-sized U.S. companies, those with annual revenue between $5 million and $2 billion, are looking for transformative deals to help them jump-start revenues,” says Bob Rubino, executive vice president and head of corporate finance and capital markets at Citizens Commercial Banking.

Yet the marketplace movement towards mergers goes beyond a simple case of turning on a faucet: How about stirring up a tsunami? Investments experts agree there wouldn’t be a drop of hyperbole to forecast 2016 as the Year of Mergermania.

“Last year’s record-breaking $3.8 trillion in mergers and acquisitions, which featured several mega-deals among very large corporations, seems to have had an impact on the thinking of many middle-market executives,” Rubino says. “Many feel this year could be their year to make a deal.”

Mergers and acquisitions are also known as M&As, but you could well nickname them M&M’s for their sweet power to tempt the C-suite executives. So stock market sugar rushes aside, what’s behind it all, really?

Last year’s monumental M&A record rested on a number of factors. For starters, M&A numbers have grown continuously every year for at least a decade. Second: Those blockbuster deals pumped plenty of rocket fuel into the pipeline. And as a recent Citizens report contends, revenue pressures have played a major role.

In this landscape of billion-dollar bets, tech and health care companies led the way. In one landmark deal between two firms barely known to the public, Netherlands-based NXP Semiconductors (ticker: NXPI) put up $16.67 billion to land Freescale Semiconductor (FSL).

But that doesn’t mean the door’s open for any ambitious business to Pass Go and Collect $200 million, even if you boast clout aplenty. After years of trying, cable and communications giant Comcast Corp. (CMCSA) gave up its $45.2 billion bid to take over Time Warner (TWX) in 2015.

Then again, one pharmaceutical powerhouse did the dance twice. In February, Pfizer (PFE) announced plans to land injectable drug company Hospira for more than $17 billion. Then in November, it scooped up Botox maker Allergan for an astonishing $160 billion. Though they agree on practically nothing else, presidential candidates Bernie Sanders and Donald Trump decried the latter deal, even as Pfizer shopped around some more: this time for movers.

“Allergan is based in Ireland, where taxes are lower,” says E. Han Kim, a finance professor at the University of Michigan’s Ross School of Business. “The corporate tax rate in the United States is still one of the highest in the world, so unless that changes, the incentive for tax- inversion deals is still there.”

Rob Berick, senior vice president and managing director of Falls Communications in Cleveland, also sees mergers growing in popularity. “Mergers are increasingly global in nature for tax and market share/scalability reasons,” he says. Yet it can also spawn drama worthy of a daytime soap, one that would no doubt earn the title “As the Globe Turns.”

“Global and regional political instability, particularly in diversified companies, will provide heartburn to a lot of CEOs and boards,” says Robert Annas, senior managing director of SOLIC Capital in Chicago. “With world economies beginning to slow, financing markets will tighten a bit.”

And when markets tighten, corporate types loosen their ties, sometimes to the point of confusing even the sharpest investors. It’s tricky enough connecting the dots when two companies become one. But how about when two companies that hope to become one are already entertaining plans to become three?

Consider the proposed merger of Dow Chemical Co. (DOW) and DuPont (DD), a $120 billion pact that made headlines in December. “There are certain forces driving to put the two companies together, but once that’s accomplished, they’ve already indicated there’s an intent to spin off certain parts of the businesses,” says James Cassel, chairman and co- founder of Cassel Salpeter & Co., an investment banking firm in Miami. “They believe the spinoff companies will have critical mass with their respective business and will prosper. Whether or not that’s the case remains to be seen.”

As for the broader M&A landscape, experts see all sorts of fireworks on the horizon. One thing is for certain: 2016 will be another explosive year, but just how incendiary is anyone’s guess.

“There is a split decision on what 2016 will be,” says Steve Sapletal, a director in the Minneapolis office of West Monroe Partners. “Mergers will continue to be strong, but I would expect longer diligence time frames and much more attention on customer and employee diligence.”

Or perhaps not. “In most markets there are too many players and consolidation will take place,” says Philip Rooke, CEO of the e-commerce platform Spreadshirt. “We’ll see many mergers and acquisitions as well as big strategic partnerships in 2016 and 2017. In general the pressure will grow: Get big or die.”

 

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Minding Your Business/Inside The Deal: Positioning your business in today’s financial landscape

By: James Cassel
January 17, 2016

James Cassel headshot

During the past few years, the financial landscape in South Florida has changed significantly for the better. The market today is flush with capital, a trend that is expected to continue in 2016. Following is some insight into what we can expect to see this year.

First, the fact that interest rates have gone up a little should not have any material effect on the availability of capital in 2016. There should continue to be plenty of money available, and it should not be much more expensive than it has been in the recent past. Interest rates may go up another half percent to 1 percent in 2016, which in and of itself is not likely to have a material effect on the region. With the recent turmoil in the capital markets, the Fed might raise rates more slowly than it would otherwise have.

Banks. During the past few years, many of the smaller or weaker financial institutions have merged or been recapitalized. Today, these institutions are in a much better position than in previous years. Simply put, they are in significantly stronger financial shape and have a need to loan money. One recent noteworthy example is Professional Bank, a boutique Miami-based bank focused on professionals and high-net- worth clients, which recently announced its proposed acquisition of Palm Beach’s FirstCity Bank of Commerce as part of its continued growth in South Florida and the continued consolidation of the industry.

As banks have kept increasing in size, a significant void has been created for small- to medium-size companies to find places to access debt. As a result, they have begun turning to peer-lending sources like Lending Tree, merchant advance companies and other sources of debt from alternative lenders. These types of lenders are generally more expensive but provide an available source of capital. Also available are loans from asset-based lenders, SBICs or SBA loans.

Venture capital money. The past year has seen increased availability of venture capital money — another trend that we can expect to continue to see in 2016. However, the amount of money available locally from local sources is not large.

Although few venture capital firms currently have their headquarters or offices in South Florida, a growing number of East Coast VCs as well as strategic investors and a limited number of West Coast VCs are taking a closer look at the right types of opportunities in South Florida. Consider Magic Leap, MDLIVE and Modernizing Medicine, which received funding in 2015.

As for angel investors, there are growing groups of organized and unorganized angel networks in town. As South Florida continues to become attractive to people from other cities, many of whom are lured by our highly desirable tax rates in addition to our weather, we will continue to see growing numbers of wealthy individuals willing to invest as angels in local companies and other opportunities.

Additionally, the state’s incentive programs led by organizations like The Beacon Council and Miami-Dade County through its Economic Incentives program are also continuing to support and encourage all of these trends.

Private equity. Recent years have seen steady growth for the private equity community and increased availability of mezzanine money, a trend we can also expect to continue in 2016. In 2015, South Florida continued to see the growth of locally headquartered private equity firms as well as fund-less sponsors.

In addition, private equity firms from outside of Florida have continued to look for opportunities in the South Florida market that they can take control of and/or invest in. The local PE firms continue to do this as well.

Recognizing these trends and the widespread availability of capital in today’s market, now is a good time for South Florida’s middle-market business owners to begin consulting with experts and thinking about how they can use this to their advantage. By doing so, they can best protect their interests and put their businesses in the best position for continued growth and success.

For one thing, the turmoil in the capital markets the first week of 2016, driven by factors outside of the U.S., raises interesting questions. Some predict that the chance of a recession in 2016 is as much as 30 percent. If this continues, strengthening your balance sheet or bringing in an equity partner might be a very good thing to do at this time. This will protect your downside if you sell a piece of your company and take some money off the table. Also, converting short-term debt to long-term debt will place you in better position to weather any upcoming storm.

 

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC. He may be reached via email at jcassel@casselsalpeter.com or via LinkedIn https://www.linkedin.com/in/jamesscassel
www.casselsalpeter.com

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2015 Technology Year In Review

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Greater Miami Chamber summit: Economic outlook positive, cautious

 January 13, 2016
By Nancy Dahlberg

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At the Greater Miami Chamber of Commerce’s South Florida Economic Summit on Wednesday, the outlook for 2016 was optimistic with healthy undercurrents of caution.

In the Jungle Island ballrooms, the summit brought together economic development leaders and top industry experts in entrepreneurship, new media, capital investment and the retail sector to share their insights about the region’s economic drivers and the year ahead.

To kick off the half-day summit attended by several hundred people, Tom Hudson, vice president of news for WLRN and master of ceremonies for the event, presented a snapshot of the economy today versus six years ago when the Chamber began holding these annual events. In that six-year period, a million people have moved to the state, a third of them to South Florida, he said. Employment has risen from 2.5 million to 2.9 million, and the unemployment rate has fallen from 10 percent to about half that. Still, median wages have remained flat, he said.

Looking ahead, Ken Thomas, an economist and banking industry expert, believes the economic outlook for 2016 is very good and foresees a maximum of two Fed interest rate increases this year. But he puts up the caution flag for 2017 and beyond: “All bets are off. We will not get out of this decade without a recession.”

On that note, the three chiefs of economic development organizations discussed the need for a powerful war chest at the state and metro levels to attract and retain companies in order to strengthen the economic engine to ride out inevitable downturns.

New companies that the region can recruit grab the headlines, but company retention is just as important, the executives said. Larry Williams, president and CEO of Miami-Dade County’s Beacon Council, offered the example of successfully retaining TUUCI, an outdoor umbrella manufacturer, which was heavily recruited by North Carolina: “Its brand is made in Miami. We need to keep companies who can lean in.”

Bob Swindell, president and CEO of Greater Fort Lauderdale Alliance, and his team recently went to Austin, Texas, to research the tech-innovation culture there and learn how the city has successfully built a brand. He believes part of South Florida’s brand could be tied to the marine industry and the strong university research programs in the marine sciences: “We really don’t tell that story effectively.”

Regional challenges include filling the talent gap in the workforce, the executives said. Williams cited the work of the Academic Leaders Council and the Talent Development Network to combat brain drain and better connect university students with opportunities. Swindell said the Alliance and its partners are working to quantify the talent gap and want to have the funds to fix the problems they find.

Much of the discussion in the summit breakout session focused on the need to build on the economic momentum the region has been experiencing, while heeding the lessons of the last recession and preparing for the next downturn. For many at the summit, that means working to accelerate the tech and entrepreneurship sectors.

Diverse, young, bootstrapped, under the radar, creative and global by nature are some of the descriptions of South Florida entrepreneurship offered up in a panel that included CEOs Brian Brackeen, founder of Kairos, a human emotions analytics startup; Will Fleming, co-founder of MotionPoint, a website translation company; and Michael Simkins, a real estate developer working to develop the Miami Innovation District. To build upon the work of the nonprofit Knight Foundation, which has committed about $20 million in funding to about 165 entrepreneurship projects and organizations, help from the for-profit sector is also needed, said Simkins, who said he has sponsored events and offered free space to entrepreneurs.

Global exposure, big exits (successful sales of companies), and a larger base of mid-sized tech companies can help propel the innovation economy here, the panelists said. Both Fleming and Brackeen acknowledged that investors over the years have tried to lure their companies to California. “Our headquarters has been, is now and always will remain in South Florida,” said Fleming, who in 2000 co-founded the fast-growing Coconut Creek-based company that manages more than 1,500 websites.

Attracting growth capital continues to be a challenge for young entrepreneurs in South Florida, but it’s getting easier at the earliest “seed” stages. “There are almost three times as many angel investors in Florida as in California,” Brackeen said.

While that may be true, angel investors in California made their money in tech “and they bring a lot to the table we are not getting down here yet,” said James Cassel, chairman of Cassel Salpeter & Co., during a panel about capital availability. But Cassel said private equity firms and family offices are increasing in Florida and so are the number of deals: “The good news is there is plenty of money available for middle-market companies. Finding the right opportunities is the challenge.”

It’s important not to automatically link the innovation economy solely with tech, said Richard Florida, founder of Creative Class Group and an urban affairs expert. “The technology component is only a part of it, and it downplays our strengths,” he said. “Miami exemplifies the creative economy,” which incorporates not only science and technology, finance and law, but also arts, culture, media, fashion, entertainment and the entrepreneurs that are leading the creative innovation. Still, only about 25 percent South Florida’s current workforce is part of the creative economy: “We have to do more.”

In a study of 360 metro areas, Florida has found that the Miami metro area ranks relatively high in technology (40th), falls in about the middle of the pack in talent (138th) — “that’s the brain-drain problem we have to turn around” — but the area ranks 11th for tolerance, he said “These are places that are open to people from all over the world. Open-minded communities win.”

Viacom is betting big on Miami’s creative economy. Juan “JC” Acosta, executive vice president and chief operating officer of Viacom International Media Networks Americas, showed the crowd a presentation on the new Viacom International Studios, which produces shows for Nickelodeon, MTV and Comedy Central worldwide and is located in the Omni area of downtown Miami. It’s an 88,000-square-foot facility with two high-tech 15,000-square-foot sound stages, along with ample office space and post-production, dressing, wardrobe and conference rooms.

“We planted our production flag in Miami,” Acosta said, noting that Viacom International Media Networks has had a headquarters here since 1993. Today, the company produces 21 series in Miami representing more than 750 hours in content, and the company has hired for more than 6,000 jobs, from full-time employees to extras, he said. “We are optimistic our studios will show the value of generating new business in the local Miami community and bring other global players to the market. . . . We hope to create a best of class here in Miami.”

This world-class production hub is exactly the type of anchor institution that a thriving creative economy needs, Florida said. “This is an important foundation stone, along with our universities and colleges, in building a broad creative economy.”