More private equity firms moving to Florida as deal flow remains strong

By Brian Bandell

The number of private equity firms based in Florida has been steadily increasing, while the number of PE-backed deals in the state remained solid in the first half of 2018, according to an analysis of PitchBook data by Miami investment banking firm Cassel Salpeter & Co.

There were 118 PE deals in Florida in the first half of this year. That’s down from 145 deals in the first half of 2017, although that number was initially reported at 109 before being updated after the end of the year.

James Cassel, chairman and co-founder of Cassel Salpeter, said some PE firms don’t report their deals on time, so the deal total is typically updated later. He expects 2018 to finish with about the same or slightly fewer PE deals than the 281 recorded in 2017.

“It’s still pretty healthy numbers, especially compared to 2008, 2009, 2010 and 2011 when the market bottomed out,” Cassel said.

The biggest growth in PE deals in the first half of 2018 came from health care and IT companies. Cassel said there’s been major consolidation in health care, as companies seeks to combine services and become more efficient. IT and technology are seen as strong growth sectors, where a company can attract a capital transaction before it even brings a product to market, he said.

With the economy performing well, many company owners are considering whether this is a good time to sell since valuations are high, Cassel said. It’s better to sell before the economy eventually takes a downturn, he said.

Southeast Florida accounted for 36.4 percent of the PE deals in the state during the first half of 2018, more than any other region of the state.

The study found that 68 PE firms were based in Florida, up from 56 in 2017 and 34 in 2013.

Cassel said the state’s favorable tax climate, with no personal income taxes, has made this an attractive place to base a PE firm so many of them are moving here. In addition, some of the more mature Florida PE firms have seen junior-level executives leave to create their own firms and built investment portfolios, Cassel said.

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5 Things to Keep in Mind When Serving Underserved Markets

Going niche and catering to underserved markets has its pros and cons. Learn how you can determine whether or not going after an untapped market is right for you.

By Geoff Williams

Underserved markets sound like they would be a gold mine—but on the other hand, there may be reasons why businesses aren’t serving them.
Plenty of people go broke panning for gold, after all.

But some people strike it rich, too. So if you’re thinking of focusing your time and efforts on a niche, underserved market, here are some strategies you’ll want to consider.

1. Remember that “underserved markets” can mean a lot of things.

It’s important to think about underserved markets because you could be overlooking a potentially robust revenue stream. If you suddenly find a demographic that you had never considered to target as consumers, you could discover an entirely new customer base simply by shifting your marketing dollars.

Addressing an underserved market requires careful planning and consideration. Sometimes perception isn’t reality.
—James Cassel, founder and chairman, Cassel Salpeter & Co.

But remember, “underserved markets” can mean more than a gender or racial demographic.

It might be a location, such as a neighborhood or city that doesn’t have many or any businesses like yours. It could be a demographic that isn’t catered to much. Or it may be a group of people who have shared experiences. For instance, your business could target twins or military veterans or vegans.

2. Look for the barriers, and not competitors, in underserved markets.

If you own a burger joint, you compete with other restaurants selling burgers. And if you sell and install carpet, you’re competing against the other companies selling and installing carpet. (I could offer 23 more examples just like this, but you get the picture.)

Many underserved markets don’t have a lot of actual competitors (that’s why they’re underserved). But they often do have situations that you’ll have to consider.

Maybe the customers you want to target don’t have much extra money, and that’s why this market doesn’t have many businesses catering to them. (Would-be competitors may be afraid they can’t make a profit.)

Or maybe there are challenging zoning issues, and that’s why other businesses haven’t put themselves into a particular community.

In other words, while you may not have many competitors in your chosen market, your “competition” might be a knotty problem you have to untangle, like figuring out how to help cash-strapped people pay for your products or services or navigating city hall for those zoning issues.

And solving the issue may take time.

“We believe one of the keys to success in going after an underserved market is patience and being in it for the long term,” says Lou Hoffman, CEO of the Hoffman Agency, a communications consultancy.

“We entered China in 1998 and it took 10-plus years before it was a profitable enterprise,” Hoffman explains. “Today, it’s a growth engine not only for our Asia Pacific operation but [for] bringing business/revenue to the U.S.”

Last November, his agency opened an office in Jakarta, Indonesia.

“Indonesia looks similar to China 20 years ago,” he says, citing factors such as its population and it being a growing hub in a lucrative region in southeast Asia.

Hoffman expects the branch to be profitable by 2019 because of the lessons he learned in China. But he also recognizes that the money may not roll in right away. It takes patience and understanding to make it in underserved markets, he says.

“I think the biggest macro pitfall is you simply can’t predict how things will go in the early going. There’s too much variability and volatility,” Hoffman says.

3. Recognize that your business may not be the right fit for an underserved market.

Boy, that sounds mean, doesn’t it? But the business laws of gravity still apply here: Do your research and make sure your business can serve an underserved market and make money doing so. (You want to be able to stay in business and continue to deliver products or services to your customers.)

James Cassel, founder and chairman of investment banking firm Cassel Salpeter & Co., based out of Miami, recalls working with a prepaid cellular phone company that attempted to offer its products to an underserved market. But it didn’t go well.

“The company was trying to do good and be successful at the same time, but they overpriced their service at a price point too high for that specific market. The result was a real negative for the company’s image after it was repeatedly accused of overcharging an already vulnerable community,” Cassel says.

You really need to do your research, Cassel adds.

“Addressing an underserved market requires careful planning and consideration,” he says. “Sometimes perception isn’t reality. You may think a market is underserved, but careful research may reveal that it is not. Sometimes the consumer just doesn’t really need or want the product.”

4. Ask yourself if your company can make the sacrifices to cater to an underserved market.

You probably will end up spending a lot of money or time, or both, in making underserved markets work out for your business. (Of course, sometimes it’s no picnic trying to make it in an oversaturated market either.)

Chad Rixse is the co-founder of a Seattle-based wealth management firm Millennial Wealth, LLC, which targets millennials.

Obviously, as a group, millennials aren’t underserved at all. But financial advisors and wealth management firms tend to go where the money is. Older adults generally have it; younger adults, not so much.

“It’s been a challenge to be highly profitable early on,” Rixse says, but he thinks it’ll pay off eventually since “this generation is going to be the next great holders of wealth in our nation and somebody will ultimately need to fill the gap that exists. I’m playing the long game here.”

5. Be prepared for other competitors to follow you.

Tres Roeder is the founder and president of Roeder Consulting, a project management and training firm based out of Cleveland. Years ago his consulting firm identified and entered an underserved market, aiming a program to help project managers develop people skills.

Whether project managers lacking people skills is an underserved market may be debatable—it’s definitely a niche market—Roeder makes a great point when he discusses what happens next.

“We had a great run—and we were a key part of a major transformation in our profession, and then everyone else entered the market,” he says.

So if you find that you’ve successfully entered an underserved market, expect to see other competitors follow after you.

“We trademarked a name for our program but found it very difficult to copyright and protect our unique content within the program. The main lesson has been to make sure we are clear on how to protect our investments in new markets. Entrepreneurs see gaps. That’s what we do. But how will you monetize and protect your product or service offering? That’s something you should think through from day one,” Roeder says.

He adds that this year, his company is launching a new service aimed at project leaders. And his company is thinking of ways to handle any competitors in the rearview mirror.

That’s the good and bad thing about being successful at offering products and services to people who have long been ignored. Underserved markets don’t tend to stay underserved for long.

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Growth in Florida private equity firms creating new opportunities for middle market business owners

By James S. Cassel

The recent growth in the number of private equity firms headquartered in Florida and news headlines surrounding ongoing PE activity is piquing the interest of middle-market business owners in selling to or partnering with private equity firms. Further fueling their interest — particularly for those who had envisioned doing this in the coming years — is the awareness that today’s healthy valuations might not last. At the same time, many are uncertain how to position their businesses to seize such opportunities. Following is some insight based on our experience.

The number of PE firms is growing nationwide, particularly in Florida. According to our latest Cassel Salpeter & Co. Private Equity Deal Report, the first half of 2018 saw a record high of 12 new Florida-based PE firms since year-end 2017, and a compound annual growth rate of approximately 13.1 percent from 2010 through the first half of 2018.

These firms come in all shapes and sizes. Some specialize in specific industries, such as technology, healthcare or consumer products. Some do large, middle-market or lower middle-market deals. Some, like Trivest, focus on buying founder/family owned businesses, while others, like Sun Capital Partners, specialize in distressed companies with untapped potential. Firms like H.I.G. Capital have a family of funds, including private equity, growth equity, real estate, debt/credit, lending and biohealth.

Generally, PE firms do not want to run companies. They seek majority stakes where they buy control of companies or they seek significant minority stakes in companies. They want to back strong management teams or put in place new management teams that they consider better positioned to grow and run the companies. PE firms can provide middle-market businesses with valuable support in a variety of areas, including process improvement, sourcing and supply chains, recruitment and human resources initiatives, and mergers and acquisitions assistance.

How can you determine whether selling to or partnering with a PE firm is right? First, make sure you understand your motivations and have confirmed this would be right for your business. Next, do not limit your options to PE firms. You might consider selling to strategic buyers or family offices. A lot depends on what you want to accomplish.

If a PE firm is your best route, then you need to find the best fit for you and your business, based on your specific motivations. Are you selling for estate- planning purposes or to retire? Do you want to take some money off the table or rearrange equity with other family or team members? Do you want growth capital to expand or help develop a growth/acquisition strategy, including support with analysis and sourcing? You might want a PE firm to leverage its relationships on your behalf, bring in capital, or help you restructure your debt. Some family-owned businesses might want help attracting different and/or better management teams.

We always recommend middle-market business owners consider an array of candidates and choose the one offering the right cultural fit and valuation. While the ideal target for a PE firm is a proprietary deal with minimal competition, this may not be best for the business owner. Sometimes, it is best to just deal with one PE firm, but this may affect your ability to maximize value. Running a competitive process is best to maximize value and understand all available options.

When conducting due diligence, speak with sellers or management of companies that the PE firms bought or partnered with and see how everything went. Ask lots of questions.
How do you find the right PE firm? Talking to industry experts, doing research and attending conferences and events is a great place to begin. Some PE firms have calling efforts or industry initiatives and attend events where they seek potential opportunities. It always is best to have an experienced investment banker and attorney assist you and serve as your advocates. Finding the right PE firm and protecting your interests in a deal is an art that requires experience and expertise, and it is critical to have the right professionals in your corner.

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. or via LinkedIn at

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Private equity deals, PE-backed companies on the rise in Florida, new report says

By Margie Manning

After a record 2017, private equity deal flow in Florida remained strong in the first half of 2018.

A new report from Cassel Salpeter & Co. shows there were 118 private equity deals in the Sunshine State from Jan. 1 through June 30. That number may go up, the report said, because data reporting generally lags behind actual activity.

There were 145 private equity deals in the first half of 2017, including deals reported after the six-month period ended, the report said.

About 17.8 percent of the private equity deals in the first half of 2018 were in the Tampa Bay area, the report said. More than a third of the total deals, 36.4 percent, were in Southeast Florida. Central Florida had slightly more deals than Tampa Bay (18.6 percent of the total) while southwest Florida and northeast Florida had slightly fewer than Tampa Bay (15.3 percent and 10.2 percent, respectively).

Private equity is a key factor in business growth, said James Cassel, chairman and co-founder of the Miami-based investment banking firm.

Private equity is different than venture capital, Cassel said. Venture capital provides funding for earlier-stage companies and is usually the first institutional money after a round of funding from friends and families and angel investors. Private equity is generally more of a buyout and can be growth oriented or used to turn around a distressed company.

A private equity deal provides an exit strategy for owners, including those who still want to remain involved with their companies, or those who want to give their management teams a chance to partner with private equity investors to get an ownership stake. Private equity investors often bring expertise in management, mergers, recruiting and sourcing production material.

“They bring a depth and breadth the company may not have in its present configuration,” Cassel said.

The report shows the number of Florida companies backed by private equity firms has increased six-fold from 2000. There were 73 private equity-backed companies in Florida in 2000, compared to 449 by June 30, 2018.

“Because Florida is the third-largest state, there should be a fair amount of activity here,” he said.

One reason for more private equity activity is the growth of entrepreneurial initiatives in the Interstate 4 corridor, from Tampa to Orlando.

“Florida has companies that are maturing and as companies grow and mature they get to a point where it’s time for an exit or the next opportunity,” Cassel said.

The report tracked private equity exits for Florida firms. There were 32 private equity exits the first half of 2018, 19 of them corporate acquisitions and 13 of them secondary buyouts.

There’s also an increasing number of private equity investors based in the state. There were 27 private equity firms headquartered in Florida in 2010, and 68 PE firms by June 30, 2018.

In the first half of 2018 alone, there were a dozen new private equity firms opening up shop in Florida, the report said.

There are a couple of reasons for that growth, Cassel said.

“We’re a very tax advantageous state. When firms are considering where they want to be based, Florida and Texas have an advantage over New York, New Jersey, Connecticut and California. It puts 5 percent to 10 percent more in the pocket of principals and general partners,” Cassel said.

In addition, as the market matures, people leave firms to start their own private equity shops, and they don’t need to leave Florida to do that, Cassel said.

That’s what happened when veteran Tampa dealmaker Scott Long left Palm Beach Capital and founded Canopy Capital Partners, a private equity firm focused on the lower middle market. Additionally, Scott Lee, previously a principal at HealthEdge Investment Partners in Tampa, opened a satellite office in Tampa for BelHealth Investment Partners, a New York-based private equity firm.

A strong economy now should keep private equity growth on track, but Cassel said there are a few factors that could derail it: interest rates rising too fast, labor shortages and restrictions on immigration. A smaller pool of potential workers drives up employee pay, he said.

Still, Florida private equity firms are positioned well, he said.

“Florida private equity firms are doing deals all over the country, partnering to make companies better and more efficient, and that gives the companies the ability to grow and survive longer term,” Cassel said.

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Cassel Salpeter & Co. Advises Sancilio Pharmaceuticals, Debtor in Chapter 11 Sale of Business Assets

Cassel Salpeter & Co., an independent investment banking firm that provides advice to middle market and emerging growth companies in the U.S. and worldwide, today announced that it served as exclusive financial advisor to Sancilio Pharmaceuticals Company, Inc., debtor-in-possession in a Chapter 11, in two sales pending in Delaware. Sancilio Pharmaceuticals is an integrated specialty pharmaceutical company that develops, manufactures and commercializes pharmaceutical products, over-the-counter and behind-the-counter products and dietary supplements in the dental and women’s health markets.

The Cassel Salpeter team, led by Chairman James S. Cassel, with the assistance of Managing Director Ira Z. Leiderman, Vice President Laura Salpeter and Analyst Julian Astrove, identified and contacted more than 300 strategic and financial parties as part of its work assisting the company.

“Running simultaneous, multiple sales processes for a company can be challenging in any transaction, let alone in a complex, fast-paced bankruptcy 363 sales process,” said Cassel, the firm’s chairman and cofounder. “I am proud of our team and the work accomplished that led to a successful outcome for Sancilio Pharmaceuticals.”

Cassel Salpeter worked with the debtor to run simultaneous, multiple sales processes with two separate stalking horse bidders for different divisions of the company. The sale of Altemia and the ALT Platform, a phase 3 ready product for the treatment of sickle cell disease; a prenatal and dental portfolio of prenatal vitamins and fluorides; and the plant and labs of the company were purchased by Micelle Biopharma, Inc.

The Ocean Blue division of the company was purchased by K.D. Pharma Bexbach GmbH.

MidCap Financial Services, LLC, the company’s lender and stalking horse bidder for all of the company assets except for Ocean Blue, was supportive of the transaction, the company and Cassel Salpeter during the entire bankruptcy and sales process.

Cassel Salpeter also worked closely with the debtors’ Chief Executive Officer, Geoffrey Glass, and debtors’ counsel, Greenberg Traurig lawyers Paul Keenan, John Dodd, Matt Miller and Sara Hoffman.

On July 23, 2018, the United States Bankruptcy Judge for the District of Delaware approved the sale of Sancilio Pharmaceuticals assets. The sale of Ocean Blue closed on August 1, 2018 and the sale of Altemia, the ALT Platform, the prenatal and dental portfolio and the plant and labs closed on August 8, 2018.

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