What could a Trump presidency mean for middle-market businesses?

By James A. Cassel

james-cassel-headshot-150x150Donald Trump is our president-elect, and his plans to “Make America Great Again” have been delivered without much meat on the bones, making it difficult to substantively assess the likely impacts of the election on the country’s middle-market companies and determine how business owners might best prepare and protect their interests. At least one thing, however, is certain: Prepare for a wild ride, if his presidency is anything like his campaign. Already, with public anti-Trump rallies and demonstrations going on around the country, it is clear the repercussions of this election could be more unpredictable and far-reaching than any of us can imagine.

While we wait to see which of his plans materialize and to what extent they become reality, it is important for middle-market business owners to be aware of certain key issues, understand how they might affect their companies and try to stay ahead of the changes. As the new administration is formed, we might get some clues from the people on the transition team and those who are nominated or appointed to better understand in which direction policy is likely to head. Also, if we listen closely, we might be able to find some clues from the comments and rhetoric from Republican leaders and members of the House and the Senate.

Following is a list of some of the most important things to watch that can affect middle-market businesses:

Jobs: The Republicans and the president-elect have talked about creating jobs by doing infrastructure projects and bringing manufacturing businesses back to the U.S. This might mean there will be plenty of new work and business opportunity for the construction trades and factory workers. One of the challenges when manufacturing returns is whether jobs are created or replaced by robotics.

Taxes: Lowering the capital gains and income tax rates of individuals, lowering business taxes and a comprehensive tax overhaul might be in the works, which could benefit businesses and provide more capital for investment. Using changes in the tax code to encourage more investment in the U.S. and discourage exportation of jobs also might be in the works. If tax rates are lowered, it might be smart to defer income until 2017 to take advantage of the lower rates.

Healthcare: The highly trumpeted abolition of Obamacare would require putting something else in its place, so it is unclear what changes will be implemented and when. President-elect Trump already has begun conceding and/or compromising on points, and modifying his campaign statements about eradicating Obamacare. While the tax associated with the Affordable Care Act might be dropped, some of the ACA’s provisions are likely to survive in some form, such as mandatory coverage for preexisting conditions and continued coverage for young adult children. The big issues are cost and coverage.

Energy: While Republicans continue to steadfastly support a reemergence of the coal industry and expansion of the oil and gas industries, at some point they cannot continue to ignore the reality of global warming and the undeniable effects we are already feeling. It is unclear what will happen to solar and other sources of alternative energy, as well as alternative energy- related advances made under President Barack Obama’s administration.

Trade: International trade could become a problematic issue. If we start retaliating, other countries can do the same, which could have a negative effect and begin a trade war. We need to wait and see the specifics, but it is clear this could have a major effect on the economy and not necessarily in a good way.

Cuba: The Trump administration has announced plans to review the U.S. relationship with Cuba and has suggested it will peel back the diplomatic progress of relations that Obama instituted during the past few years. Clearly, this would diminish any potential business and growth opportunities in Cuba for U.S. middle-market businesses.

Immigration: Expelling illegal immigrants from the country will leave huge job openings and hurt the GDP and economy. If visa programs are changed, companies might find it harder to find skilled workers among a limited labor pool.

Regulation: Rolling back government rules and regulation will lower overall costs and be good for business. A careful review might be very beneficial. This will enhance growth.

Most important, with many of the policies, we will see an increasing deficit and therefore should keep our eyes on the rise of interest rates and the possibility of inflation.

While we wait to see what the president-elect and the new administration do and Tweet about when he takes office, middle-market business owners should protect their best interests by studying the issues and preparing for the best- and worst-case scenarios.

We certainly live in interesting times.

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 jcassel@casselsalpeter.com or via LinkedIn at https://www.linkedin.com/in/jamesscassel. 

To view original article, click here.

Cassel Salpeter & Co. Represents Boxycharm in Successful Follow-on Investment by KarpReilly

Based on Boxycharm’s Success, Connecticut Private Equity Firm Exercises Option to Increase Stake in Boxycharm

MIAMI – November 14, 2016 – Cassel Salpeter & Co., a middle-market investment banking firm, today announced that Connecticut private equity firm KarpReilly LLC has invested additional capital in Boxycharm, an option in the successful deal completed by Cassel Salpeter earlier this year. Cassel Salpeter, which provides capital-raising services as well as merger, acquisition, divestiture and corporate finance services, served as exclusive financial advisor in both deals.

The money will be used for innovative marketing programs and other initiatives to reach new subscribers for Boxycharm, a monthly beauty box subscription service providing high-end beauty and cosmetic products. The amount of the deal, which closed on October 13, is undisclosed.

“We are thankful for Cassel Salpeter’s guidance in both of these significant deals, which effectively enable us to strengthen Boxycharm’s momentum and leadership positioning,” said Joe Martin, who will continue in his role as Boxycharm’s CEO. “Cassel Salpeter identified and brought on KarpReilly, a premier PE firm behind many of the nation’s biggest and most well-known consumer brands. It was a master-stroke, as our partnership with KarpReilly was immediately off to a great start.”

The team at Cassel Salpeter was led by Director Joseph “Joey” Smith and Vice President Philip Cassel, who assisted the Miami-based Boxycharm through the closings of both transactions.

“We are pleased to continue to work with the high-caliber professionals at Boxycharm and KarpReilly and support their mutual goals of maximizing Boxycharm’s phenomenal growth potential,” Philip Cassel said.

Added KarpReilly Principal Hank Spring: “We continue to be very impressed with what Joe and his team at Boxycharm have accomplished and are excited to be able to further support him and the company in delivering value and a best-in-class experience to their customers.”

Berger Singerman attorneys Daniel Lampert, David Black and Mitchell Goldberg represented Boxycharm. Ropes & Gray attorneys Daniel Evans, Darlyn Heckman and Michael Ross represented KarpReilly.

 

About Cassel Salpeter & Co.

Cassel Salpeter & Co., LLC 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

 

About Boxycharm

Boxy Charm Inc. is the premier monthly beauty box subscription service, delivering 4-5 full-size and luxury travel-size products of well-known, popular, chic, and up-and-coming cosmetic brands for only $21 per month. For more information, please visit www.boxycharm.com

 

About KarpReilly
KarpReilly, LLC, is a private investment firm, founded by Allan Karp and Chris Reilly, whose primary mission is to partner with premier small- to mid-size growth companies and help them achieve their long-term vision. KarpReilly currently manages funds and affiliates with capital commitments in excess of $500 million. Over the past 15 years, the principals of KarpReilly have invested in, sat on the boards of and nurtured over 25 growth companies. For more information, please visit www.karpreilly.com

Tecogen to Acquire American DG Energy

ne91281logoWALTHAM, Mass., Nov. 2, 2016 /PRNewswire/ — Tecogen Inc. (NASDAQ: TGEN) (“Tecogen”) and American DG Energy Inc. (NYSE MKT: ADGE) (“American DG”) today announced that their Boards of Directors unanimously approved a definitive agreement under which Tecogen will acquire all of the outstanding shares of American DG in a stock-for-stock merger. Each share of American DG common stock will be exchanged for 0.092 shares of Tecogen common stock, valuing American DG at an approximately 27% premium to the company’s most recent closing share price. The transaction creates a vertically integrated clean technology company able to offer equipment design, manufacturing, installation, financing, and long term maintenance service. The combined company will retain the Tecogen Inc. name and be led by Co-Chief Executive Officers John Hatsopoulos and Benjamin Locke.

“We are extremely pleased with this transaction and believe that over time it will create significant value for shareholders. I’d like to thank the independent special committees of the boards of both companies for their diligent work to bring this deal to fruition,” said John Hatsopoulos, co-founder, co-CEO, and director of both Tecogen and American DG.

Transaction Rationale and Highlights

  • Competitive Advantage– Bringing American DG under the Tecogen umbrella allows Tecogen to offer a cost-free-installation option to customers without access to financing, sufficient capital on hand, or for those who may not be interested in owning and maintaining the equipment – creating a vertically integrated clean technology company better able to compete with other distributed generation peers offering in-house financing arrangements.
  • Stable Revenue Base –On a combined basis, approximately half of total company annual revenue is initially expected be from stable, long-term contracted sources (Tecogen Service revenue and American DG Energy revenue). This revenue base will provide a reliable funding source for both operating expense and growth initiatives while also making the combined company’s revenue profile more predictable, reducing the revenue volatility caused by somewhat cyclical equipment sales and installations.
  • Growth Potential –Shareholders of the combined company will benefit from Tecogen’s ongoing growth initiatives and joint venture interests, including automotive emissions control joint venture Ultra Emissions Technologies Ltd. (“ULTRATEK”) and cogeneration joint venture TTcogen LLC.
  • Cost Savings– The combined companies expect to benefit from approximately $1 million of general and administrative cash savings as duplicative functions are eliminated.

Upon closing of the transaction, Tecogen shareholders are expected to own approximately 81% and American DG shareholders are expected to beneficially own approximately 19% of the combined company.  The stock-for-stock transaction is intended to be structured such that it is tax-free to shareholders.

Approvals and Timing
Completion of the transaction is subject to satisfaction of customary closing conditions and the approval of shareholders of both companies.  No voting agreements have been entered into in connection with the transaction, and there are no lock-up agreements, no-shop covenants or termination fees contained in the merger agreement.  The transaction is expected to close in the first half of 2017.

Advisors
Scarsdale Equities issued a fairness opinion to the Special Committee of the Board established by Tecogen Inc. in connection with the transaction, and White, White and Van Etten, P.C. are acting as the Special Committee’s legal counsel.  Cassel Salpeter & Co. is acting as financial advisors to the Special Committee of the Board established by American DG Energy Inc. and Gennari Aronson, LLP is acting as legal counsel to the American DG Special Committee.

Conference Call and Webcast
Tecogen and American DG will take questions regarding this transaction on their third quarter 2016 earnings conference calls hosted Thursday, November 10, 2016. For information about the conference calls please visit:

For Tecogenhttp://investors.tecogen.com/webcasts or http://investors.tecogen.com/2016-10-12-Tecogen-Schedules-Earnings-Release-and-Conference-Call-for-Third-Quarter-2016-Results.

For American DG http://investors.americandg.com/webcast or http://investors.americandg.com/2016-10-14-C-O-R-R-E-C-T-I-O-N-American-DG-Energy-Inc.

About Tecogen
Tecogen® Inc. designs, manufactures, sells, installs, and maintains high efficiency, ultra-clean, cogeneration products including natural gas engine-driven combined heat and power, air conditioning systems, and high-efficiency water heaters for residential, commercial, recreational and industrial use. The company is known for cost efficient, environmentally friendly and reliable products for energy production that, through patented technology, nearly eliminate criteria pollutants and significantly reduce a customer’s carbon footprint.

In business for over 20 years, Tecogen has shipped more than 2,300 units, supported by an established network of engineering, sales, and service personnel across the United States. For more information, please visit www.tecogen.com  or contact us for a free Site Assessment.

Tecogen, InVerde, Ilios, Tecochill, Ultera, and e+, are registered trademarks or trademark pending registration of Tecogen Inc.

About American DG Energy
American DG Energy supplies low-cost energy to its customers through distributed power generating systems. We are committed to providing institutional, commercial and small industrial facilities with clean, reliable power, cooling, heat and hot water at lower costs than charged by local utilities – without any capital or start-up costs to the energy user – through our On-Site Utility energy solutions. American DG Energy is headquartered in Waltham, Massachusetts. Learn more about how American DG Energy reduces energy costs at www.americandg.com or follow us on Facebook and Twitter.

Additional Information about the Proposed Transaction and Where to Find It
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or approval.  In connection with the proposed transaction, Tecogen and American DG will prepare and file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents with respect to the merger.  INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, THESE ITEMS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by Tecogen and American DG with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov.  Copies of the documents filed by Tecogen with the SEC will also be available free of charge on Tecogen’s website at www.tecogen.com and copies of the documents filed by American DG with the SEC are available free of charge on American DG’s website at www.americandg.com.

Tecogen, American DG and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Tecogen’s and American DG’s shareholders in respect of the proposed transaction.  Information regarding Tecogen’s directors and executive officers can be found in Tecogen’s definitive proxy statement filed with the SEC on May 5, 2016.  Information regarding American DG’s directors and executive officers can be found in American DG’s definitive proxy statement filed with the SEC on May 13, 2016.  Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SECin connection with the proposed transaction if and when they become available.  These documents are available free of charge on the SEC’s website and from Tecogen and American DG, as applicable, using the sources indicated above.

Cautionary Language regarding Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements regarding Tecogen’s, American DG’s or their respective separate or combined future financial position, results of operations, cash flows, funds from operations, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, merger integration, growth opportunities, dispositions, plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions or the negative form of the same are forward-looking statements.  Such forward-looking statements are inherently uncertain, and security holders must recognize that actual results may differ from the companies’ expectations.  Neither Tecogen nor American DG undertakes a duty to update such forward-looking statements, which speak only as of the date on which they are made.

Tecogen’s and American DG’s actual future results and trends may differ materially depending on a variety of factors discussed in their filings with the SEC.  These factors include without limitation: (a) the satisfaction of the conditions to closing the transaction in the anticipated timeframe or at all; (b) the failure to obtain necessary regulatory and stockholder approvals; (c) the ability to realize the anticipated benefits of the transaction; (d) the ability to successfully integrate the businesses; (e) disruption from the transaction making it more difficult to maintain business and operational relationships; (f) the negative effects of this announcement or the consummation of the proposed transaction on the market price of Tecogen’scommon stock; (g) significant transaction costs and unknown liabilities; (h) litigation or regulatory actions related to the proposed transaction; (i) the ability and willingness of each company’s customers to meet and/or perform their obligations under their respective contractual arrangements with the company; (j) the ability of each company to maintain the financial strength and liquidity necessary to satisfy their respective obligations and liabilities to third parties, including without limitation obligations under their existing debt instruments; (k) each company’s success in implementing its business strategy; (l) the nature and extent of future competition and technology developments; (m) the extent of future or pending regulation of the energy sector; (f) the future cost and trends in electricity prices from utilities and other sources; (n) changes in general economic conditions and/or economic conditions in the markets in which each company may, from time to time, compete and the effect of those changes on the company’s revenues and its ability to access the capital markets or other sources of funds; and (o) each company’s ability to pay down, refinance, restructure and/or extend its indebtedness as it becomes due.  Many of these factors are beyond the control of the companies and their management.