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.”

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Selling your business? Consider taking a gap year

By James S. Cassel

So, you’ve sold your business. What should you do next? Take a gap year! While most people associate gap years (also known as “bridge years”) as a break between high school and college or between graduating college and entering the “real world,” gap years should not be reserved exclusively for young adults. As George Bernard Shaw famously said, “Youth is wasted on the young.” A gap year is a chance to get a piece of it.

The American Gap Association provides extensive information on its website about the growing popularity of gap years in the United States and benefits for young graduates. As the nonprofit accreditation and standards-setting organization for gap years recognized by the U.S. Department of Justice and the Federal Trade Commission, its focus is “increasing the awareness of Gap Years and their many proven benefits within according to its website. The site mentions successful programs gaining notoriety, such as the Bridge Year Program at Princeton University: “The knowledge, understanding, and skills gained through the Bridge Year serve not only to enhance a student’s undergraduate experience at Princeton, but also contribute to the overall strength of the University’s educational community,” the site reads.

These benefits are not limited to college students. I have witnessed highly successful individuals take gap years after selling their businesses, when they are not yet willing to retire but want to take some time off. They have used the time very wisely to attain even greater professional and/or personal success and fulfillment. Here is the secret:

First, make sure your financial house is in order. Consult your financial advisors and develop a financial plan.

Discuss your plans openly with your spouse, partner or significant other. This can help ensure you both enjoy the time and are on the same page.

It is generally best to enter a gap year with a “vision” for what you want to focus on doing, and preliminary ideas circling your head about what you might want to do next. Let these ideas simmer, without pressuring yourself, until you confirm your next career steps. As an example, I recently met a woman who moved to Miami to take a “gap period.” She is volunteering at various places, including the Pérez Art Museum, immersing herself in the Miami business community as part of her goal of understanding the local business environment and determining where she might best find the right situation or business to start.

During your gap year, you should focus on doing the things you always dreamed of doing, but never had the time, money or guts to do — travel the world, learn yoga, go back to school, learn a language or write a book. Or just hang out.

However, do not fall completely out of the game. Stay in touch with your contacts and keep your finances in check so you can be ready for your next move.

Your gap year does not have to be a full year. It may be a few months, or it may have no end.

I regret not having taken a gap year earlier in life. I missed a perfect chance in 2010 after leaving the firm to which I sold my business and before I started a new company. While I am not planning on taking one anytime soon, I keep this on my bucket list. For me, it will take the place of retirement. Maybe I will call it a “sabbatical.”

Why is this time important? Quite simply, there is no time like the present. That “perfect moment” may never come. We must prioritize ourselves and find a way to make the time. In addition to enhancing our quality of life (after all, the reason most of us work, besides enjoyment, is to secure better lives), it gives us more clarity to do the necessary soul-searching to not only figure out our next move, but also make sure that our next move is the right one.

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

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What Made PizzaRev a Prime Takeover Target?

ACQUISITION: Ex McDonald’s executive takes majority stake in custom pizza chain.

By Helen Floersh

Restaurant franchisor PizzaRev Inc. has been acquired by an investment firm headed by a former McDonald’s Corp. executive.

The Westlake Village pizza chain on May 22 announced that Cleveland Avenue, led by one time McDonald’s chief executive Don Thompson, had purchased a majority stake in the company. Financial terms of the deal were not disclosed.

“Our mission is to provide collaborative expertise and … resources to our network of industry partners,” Thompson said in a statement. “We’re attracted to PizzaRev because of its scale for growth.”

PizzaRev and Cleveland Avenue declined requests for further comment.

Founded in 2012 by former music industry executives Irv Zuckerman and Rodney Eckerman, PizzaRev’s primary product is customizable personal pizzas, which it sells with unlimited toppings for roughly $8.65 each. While similar in style and offering to competitors such as MOD Pizza and Blaze Pizza, PizzaRev’s rapid expansion differentiates it from others in the sector. Much of its growth as a franchisor can be attributed to an early investment from Buffalo Wild Wings Inc., which purchased a minority stake in 2013 to become PizzaRev’s first franchisee. The publicly traded sports bar chain stopped growing its holdings late last year; by the partnership’s end, PizzaRev had expanded from two to 46 locations in North America, including four in Mexico. It claims to have more than 200 in the development pipeline.

For the next phase of growth, PizzaRev is wise to entrust its brand to a franchise industry veteran like Thompson, said mergers and acquisitions expert James Cassel, chairman and co founder of Miami investment banking firm Cassel Salpeter & Co.

“(Thompson) has a tremendous resume when it comes to the food service business,” Cassel said. “His expertise can also give PizzaRev the credibility to expand in the franchise space.”

That knowledge will come in handy as competition grows increasingly fierce, Cassel continued. Thompson worked his way up through McDonald’s ranks during the 1990s, when the company was competing with Burger King to rule the quick service hamburger realm. Therefore, his insight may be useful in helping PizzaRev further distinguish itself from other fast casual pizzerias to emerge as the industry’s leading player.

“PizzaRev is still small enough that someone could come and put a real imprint on it,” Cassel said. “I think that’s where Cleveland Avenue comes in.”

MGA, Menchie’s Partnership

A pair of local companies are teaming up this summer to launch a marketing campaign they hope will be a big win with kids across the country.

Van Nuys toy maker MGA Entertainment Inc. has partnered with Menchie’s Frozen Yogurt to develop limited edition sets of sweet smelling “Num Noms,” MGA’s scented plastic dolls. Aimed at girls ages 5 to 9, the collectible toys will be sold online and at Toys R Us Inc. stores around the country starting in July. They will also be featured in a special campaign at 420 Menchie’s locations throughout the U.S., according to the companies.

“There were so many characteristics of the individual brands that related to each other,” Julie Boylan, head of global licensing at MGA, explained. “It just seemed like a great idea to build a product out of it.”

The toys feature elements of Menchie’s branding, such as the pink and green swirl of frozen yogurt that appears in its logo, and are scented to invoke the company’s top rated flavors. The partners were careful to design the collection so that the brands’ unique elements blended organically, Boylan said. MGA has been selling Num Noms since 2015. Playsets are released temporally as collectible “series,” a tactic many toy companies use to encourage customer loyalty. The sale of collectible kids’ toys grew 33 percent in 2016 to reach $1.8 billion, accounting for roughly 10 percent of total industry sales, according to the market research arm of NPD Group Inc. In the playset dolls and accessories category, Num Noms was ranked the No. 2 product by dollar growth year to date as of March 2017, a report from NPD found. Harnessing Num Noms’ popularity with Menchie’s position as the nation’s largest frozen yogurt company makes for a scrumptious marketing opportunity, Boylan said. Even if Menchie’s had not been in the neighborhood, MGA would have been just as eager to pursue a partnership, she added.

“(Being local) certainly makes doing business easier, but it’s a natural fit when you look at Num Noms’ and Menchie’s brands,” Boylan said. “There are so many similarities that it makes Menchie’s the perfect partner.”

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