Archive for year: 2022

By Demitri Diakantonis
June 6, 2022

People are moving to Florida in droves since the pandemic started. In fact, more folks moved there than any other state last year. Tax friendly with no state income tax. Tons of sunshine. And the second most miles of coastline behind Alaska (but we’ll take a waterfront property in Miami over Nome any day of the week).

But individuals aren’t the only ones seeing the light. Private equity firms are opening offices in cities such as Miami and West Palm Beach. Name-brand shops like Los Angeles’ Levine Leichtman Capital Partners, Thoma Bravo and GTCR from Chicago all recently opened offices in the state. There are several reasons for firms taking a shine on the Sunshine State.

“One of the driving factors behind this growth,” says James Cassel, co-founder of Miami-based investment bank Cassel Salpeter & Co. “is the ability for people to work remotely, which has now been validated as an effective practice, and indeed has actually been shown to foster a positive work/life balance, which has been useful for recruiting and retaining top talent. This resulted in people considering relocating to South Florida, not only because they can work remotely, but also because of the economic benefits.”

PE Growth

Lee Bryan, a senior partner at Comvest Partners in West Palm Beach, says his firm recognized the benefits of a Florida presence years ago.

“Some people may not realize that PE has had a sizable presence in Florida for quite some time,” Bryan says. “Comvest’s roots in West Palm Beach date back more than 20 years. Several peers are based in cities like Boca Raton and Miami.” Access to three international airports also makes Florida business-friendly, Bryan adds.

Comvest, which typically invests up to $125 million, has invested in some Florida-based companies since it was founded in 2000 including Bel USA (d/b/a discountmugs.com), a Miami-based printer and online retailer of customized promotional products in 2014, and Leixir Dental Group, a Tampa-based provider of dental solutions with a focus on digital dentistry in 2021.

Sun Capital is another notable PE firm with deep roots in Florida. CoCEOs Marc Leder and Rodger Krouse, who met as classmates at Wharton, set up shop in Boca Raton in 1995 to focus on turnarounds and underperforming companies. They’ve since expanded to New York, Los Angeles and London over the last 26 years and raised seven funds.

Other PE firms are putting down roots here. Levine Leichtman Capital Partners, which raised Fund III at $1.4B last year, opened an office in Miami in 2020, while GTCR opened one in West Palm Beach earlier this year.

Local Deals

But it’s not just the desirable climate that’s pushing these firms south. It’s also the dealflow. Technology is one sector in particular that has been seeing robust local deal activity.

“The growing local tech sector has brought a new crop of companies that are available for acquisition, which in turn has brought a new crop of buyers looking for opportunities in traditionally overlooked areas,” Cassel adds.

In 2021, Thoma Bravo opened an office in Miami citing the region’s growing tech sector. “Establishing an office in Miami has not only expanded and enhanced our presence in the U.S., but also provided a gateway to other national and global markets to help support Thoma Bravo’s overall growth,” says Chip Virnig, a partner at Thoma Bravo. “Since we opened our office last year, our team in Miami has grown to 45 people, including a number of new hires attracted to our collegial and entrepreneurial culture. Miami is a vibrant and growing tech and financial hub that’s welcoming and fostering innovative thinking.”

Cassel sees this trend as well. “There are a lot of technology companies that are growing and maturing that could be great candidates for acquisition and that is driving buyer interest,” he says. “There has been a major commitment to pushing South Florida to build its tech sector. Mayor Suarez of Miami is active in support of bringing new companies to South Florida and helping them find the right resources. There are also a growing number of incubators and accelerators, along with a growing base of angel investors. With Covid, people can work from anywhere, so now many tech entrepreneurs are choosing South Florida as their base.”

As an example, Cassel cites SaaS Provider Pros’ (NYSE: PRO) acquisition of Miami-based digital marketer EveryMundo for up to $90 million in November. Pros offers software that is designed to improve shopping and selling experiences. EveryMundo, a bootstrapped growth story started in 2006, is known for helping airlines sell offers directly to consumers.

“Many times, especially for tech companies because tech companies can change very rapidly, they decide to sell,” says Cassel, whose firm co-advised EveryMundo. “Sometimes they sell because they hit a wall in their ability to raise capital and other times, they determine it’s better to be part of a larger organization.”

In another local deal, commercial bank Truist Financial Corp. (NYSE: TFC) completed its acquisition of Service Finance Co. in December 2021. Boca Raton-based Service Finance uses proprietary technology to offer financing and lending services to contractors and other consumers that are used towards home improvements. The majority of Service Finance’s loan applications are completed on its mobile application.

PE firms will go wherever deals are flowing and right now that place is South Florida. “PE firms will increasingly move to or open offices in South Florida as a result of the many attributes this area has to offer,” Comvest’s Bryan says. “We expect this growth trend to continue.”

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By Zac Ezzone
May 24, 2022

A Raleigh-based clinical research company is continuing its expansion in the U.S. with a recent acquisition.

M3 Wake Research, an organization of integrated clinical trial sites that support phase I-IV studies, has acquired the Florida-based firm Multispecialty Research Associates, the company announced last week. The latter, based in Lake City, Florida, also conducts clinical trials in a number of therapeutic areas, including vaccine research for Covid-19 and other infectious diseases.

The companies didn’t disclose the financial details of the transaction.

In a statement, Dr. Ella Grach, president and CEO of Wake Research, said the acquisition expands the company’s network of study sites. Through its sites, Wake Research has conducted more than 9,100 research studies since its founding for hundreds of pharmaceutical and biotech companies and contract research organizations, or CROs.

“Joining together will enable us to provide even greater care opportunities for diversified patient populations and expand our reach and impact into Florida,” Grach said.

With this acquisition, Wake Research will operate a network of 23 research sites in nine states: Alabama, Arizona, California, Florida, Georgia, Nevada, North Carolina, Tennessee and Texas. The deal follows Wake Research acquiring California-based Women’s Health Care Research in November 2021. That deal grew the company to more than 18 clinical trial sites nationwide and five in California.

Additionally, in 2019, Wake Research completed the acquisition of Clinical Research Center of Nevada. At the time of this transaction, the company had 16 trial sites throughout the U.S.

Prior to the Nevada deal, Wake Research was purchased in 2018 by M3 Inc., a global conglomerate of services for the health care and life sciences industries. At the time of the acquisition, Wake Research operated 12 clinical trial facilities, according to a statement M3 released at the time of the deal.

M3 (OTCMKTS: MTHRY), a publicly traded company in Japan, provides services to physicians and others in health care through its numerous subsidiaries. The company’s annual revenue for 2021was about $1.8 billion.

Cassel Salpeter & Co., an independent investment banking firm that provides advisory services to middle market and emerging growth companies in the United States and worldwide, today announced that it has successfully advised Multi-Specialty Research Associates, Inc. (“MSRA”), a founder-owned clinical research site, in its sale to M3 Wake Research (“Wake Research”), an integrated organization of premier investigational sites.

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No relief in sight to high prices at the pump, as the fallout ripples through society

By Evan Halper
May 20, 2022

School officials in Davenport, Iowa, expected that keeping the tanks of district buses filled would be a challenge in these days of high gas prices. What they were not prepared for was prices at the pump making it such a challenge to keep students fed.

As gas prices climbed past $4, snacks of rainbow carrots and other enticing fresh fruits and vegetables delivered as part of federal grant to promote healthy eating were suddenly in jeopardy. The grant got drained as the vendor tacked on extra charges to cover the high price of fuel, forcing some schools to end deliveries early.

Troubles with bread came next. The company delivering it first asked for hefty fuel surcharges before ultimately telling the district not to bother. It said it can’t afford to keep loaves coming to schools next year at all. The district has turned to another company, paying nearly double — $40,000 more  — for less frequent deliveries.

Why gasoline prices remain high even as crude oil prices fall

“It’s very stressful,” said Coni Dobbels, the Davenport school district’s food and nutrition services director. “People keep saying, ‘Aren’t things at schools better this year than they were last year?’ They’re not. I have never experienced anything like this.”

The shocks of high gasoline costs are ricocheting through the economy, as prices at the pump continue to rise, and industry analysts see little relief on the horizon. Even as drivers are loath to change their habits, with Americans eager to get on the road after pandemic cabin fever, the fallout from high gas prices is touching every corner of society.

Retailers and trucking companies are in a state of high anxiety over worsening diesel shortages, with an increasing threat that the fuel will need to be intermittently rationed at filling stations in some parts of the country. Similar worries are gripping the airline industry, as jet fuel becomes more scarce.

Concern about soaring fuel prices is spreading to restaurateurs, as dining out tends to be high on the list of spending that gets cut when household budgets are strained by filling up at the pump. Manufacturers are wrestling with the cost of plastic packaging, which is made from the same crude oil in high demand for gasoline. Boaters are weighing whether they should delay putting their vessels in the water, now that filling their tanks can run hundreds more dollars.

Biden takes additional steps to ease gas prices as inflation rises

Gas prices keep passing earlier milestones, now averaging more than $4.59 per gallon nationwide. That is 50 percent higher than gas was at this time last year, according to AAA, as factors converge to create supply shortages not seen since the run-up to the Great Recession in 2008.

While the war in Ukraine is playing a major role, as the world shuns Russian oil, it is not the only challenge. The plunge in fuel demand during the pandemic moved producers to cut back on their investments in drilling and refining capacity. The oil-and-gas sector now finds itself ill-equipped to meet the demand of a society getting back on the road. The federal government has exhausted most of the limited tools it has to confront price spikes, such as releasing oil from the Strategic Petroleum Reserve.

“The bottom line is, it is going to be an expensive summer,” said Michael Tran, managing director for global energy strategy at RBC Capital Markets. The warning was echoed this week, albeit in more subdued language, by Treasury Secretary Janet L. Yellen, who said during a visit to Germany pressure on energy prices is likely to continue in the near-term.

Yellen warns of global ‘stagflationary’ risk from gas, food prices

As climbing gas prices force Americans to change their spending habits, one thing Americans aren’t doing very much of is driving less. All that driving in this moment of low fuel supply pushes prices up further. “As we reopen, there is a lot of pent to makeup demand,” Tran said. “People are willing to pay higher prices up for lost travel over the last few years.”

It is a different economic landscape than when gas prices last spiked like this, in the summer of 2008. At the time, Americans had been on a spending frenzy for a while and household savings rates were particularly low. Nonessential driving was a luxury more Americans could not afford then. Gas prices dropped again relatively quickly following a brief surge.

By contrast, household savings right now are at record highs, after people spent less during the coronavirus pandemic. “We were never, as a population, more ready to absorb high gas prices than we are right now,” Tran said. So even as prices keep going up, demand is not easing, which puts pressure on prices to go up even further.

Memorial Day Weekend is expected to bring 37.9 million Americans to the road, more than traveled by car over that holiday weekend before the pandemic hit, and an increase of 8.5 percent over last year, when gas prices were considerably lower, according to projections by the location data firm Arrivalist. The firm attributes the trend, in part, to Americans forgoing air travel. Plane ticket prices have become prohibitively expensive the airline industry struggles with its own fuel scarcity.

While Arrivalist’s pronouncement that “the American road trip is thriving” is hardly an overstatement, some drivers are stunned by what they are seeing at the pump.

Amanda Laudwein of Silver Spring was finally able to attend her nephew’s wedding in Death Valley National Park, which spans Nevada and California, this month after it was twice postponed because of covid. The already expensive trip came with an unexpected cost: The price for a gallon of unleaded at Death Valley’s Furnace Creek gas station, the only place to gas up for miles, was $8.25.

“It cost us $120 to fill up our van,” she said. “It was quite a shock.”

Like many other Americans, though, the 67-year-old has no plans to cut back on her travel. She is looking forward to a cross-country road trip in the fall regardless of whether gas prices are high then. “People have been so careful with their money for so long,” she said. “It is not going to stop us from going where we want. … I want to see the big prairies.”

Even as old driving habits remain, the high gas prices are forcing Americans to make other adjustments to accommodate them. Walmart this week saw its stocks suffer their biggest decline since 1987 amid an earnings report that acknowledged high gas prices are hammering its business. They are creating unanticipated operational costs for the company and also changing the ways consumers shop, as they try to consolidate their trips to the store and forgo purchasing items that are not daily necessities.

As they see so much of their money going into their gas tanks, Walmart CEO Doug McMillon said on an earnings call this week, “customers are even more price sensitive right now. … They’re paying close attention.” He described Walmart shoppers at this moment as “portfolio managers” carefully balancing their budgets and more reluctant to buy something like a piece of sporting equipment unless they see a price drop.

Consumers are also impacted in unexpected ways. A decade-old study found obesity rates tend to go down when gas prices spike. Not so much because people abandon their car to walk or bike, but because they cut out of their budgets services like house cleaning and gardening, opting to burn the calories doing it themselves.

Older drivers who lived through the gas shortages and accompanying stagflation of the 1970 s, meanwhile, are more likely to associate rising prices at the pump with a souring economy and cut back their spending sooner, according to a recent study built on extensive survey data from Gallup.

“I grew up waiting in line to get gas,” said James Cassel, an investment banker in Miami. “Most people don’t remember that.”

While Cassel said he’s relieved not to be reliving the long lines at the pump endured during the 1970s, the soaring prices are creating a cascade of headaches for the midsize companies he invests in. Fuel and other costs for manufacturers are mounting so fast, he said, that big-box retailers are easing their rules on when manufacturers can hike the price of products on store shelves.

But that doesn’t mean consumers won’t just turn to buying generics. Cassel is working with a food company struggling to readjust its budget for excessive gas costs, as it weighs whether they will lose more customers if they increase the price of their product, or instead cut costs by shrinking its size.

Economists and energy analysts warn the prospects are dim for this cycle of increasing energy prices driving evermore inflation to end anytime soon. There are only a few things that could bring it to a close. One is a huge uptick in available oil, gas and renewable energy, which most analysts say is years away. The other is a recession.

A less-painful alternative to a recession would be consumers tiring of the high prices and moderately pulling back on their spending on gas and other products, driving down demand for fuel.

“If this were not the covid reopening year, I would say consumers start to pull back when gas hits $5 a gallon,” Tran said. “But I am reluctant to make those predictions for this summer. A year from now, maybe everyone has had their fill of travel and demand starts to drop.”

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May 2022

SENIOR MANAGEMENT

Laura Salpeter, a director at Cassel Salpeter & Co., draws on her experience in the legal sector to provide a thorough, efficient analysis of complex financial transactions. In this role, she contributes to the firms M&A, restructuring and financial advisory services.

Laura is a member of both The Florida Bar and the District of Columbia Bar and has become a member of the board of directors for ACG South Florida.

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.

Laura received her Master’s and Bachelor’s degrees from the University of Central Florida and her Juris Doctor from Nova Southeastern University.

What Challenges Have You Faced in Your Career? How Did You Overcome Those Challenges?

I have to work twice as hard as my male counterparts and be twice as good.

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