Private equity deals poised for takeoff in Florida

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By Margie Manning
April 1, 2015

A private equity company that recently relocated to Tampa is among a growing number of investment firms making their home in the Sunshine State.

Florida is the headquarters for 37 private equity firms, up from 27 firms in 2010, according to research by Cassel Salpeter & Co., a Miami-based investment banking company. Three firms set up shop in the state during 2014 – Supply Chain Equity Partners in Tampa, Brinkmere Capital Partners in Jacksonville and Innovative Capital Partners in Naples, a spokesman for Cassel Salpeter said.

The expanded presence of private equity investors in the state is a positive sign, because funders often prefer to be close to the companies in which they invest. That could mean more Florida businesses will be in line for capital and expertise they need to add jobs and grow, and that Florida firms sold to private equity investors likely will remain in the state.

There were 162 private equity deals in Florida in 2014, down 2.3 percent from the 166 deals in 2013, but a drop of a couple of deals does not make a huge difference, said Jim Cassel, co-founder. He’s more focused on a three-year trend that shows private equity deal flow remains strong. He expects that trend to continue, as Florida’s relatively young companies mature.

“There’s been a sea change among private businesses. Years ago, people used to sell businesses in their 50s and then retire,” Cassel said. “Now owners are holding them longer. Ten years from now, I think the number of private equity deals will be up by 25 percent, because those business owners who are 58 now will be 68 then and ready to retire.”

Casselsalpeter Deal Report Winter 2015 by JoLynn Brown

 

 

 

Time to stop Miami’s brain drain: Bring our children home

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By James S. Cassel
Special to the Miami Herald
March 15, 2015

cassel

While it is great that many of our children are attending prestigious out-of-state colleges and universities and starting their careers elsewhere, it is a real problem that many aren’t coming back to work in Miami after they have graduated or gained useful work experience. Putting the brakes on this “brain drain” is critical for Miami’s future — especially in light of our ongoing efforts to position the city as a global business hub. We need a stronger local talent pool to support our city’s continued growth and to create new business opportunities, and our youth are one of our best assets.

Our business community must take a proactive approach to address this issue. How?

For starters, we should actively connect Miami’s youth with potential employers, referral sources and other key contacts. A quick email introduction or phone call from a trusted contact can go a long way toward motivating a business owner or a hiring manager to move certain résumés to the top of the stack and consider the candidates or at least forward their résumés to others who may be interested. I have made it a habit of connecting people in this way. I tell candidates I cannot guarantee them the job but I can generally get their résumés noticed. My matchmaking has greatly benefited the candidates and employers alike.

When facilitating these introductions, keep in mind that a major selling point helping these highly qualified candidates stand out is that they are from the local community. Employers recognize that they are better off hiring candidates with local connections and who are comfortable living here, as these candidates are more likely to stay and succeed. Greatly coveted are graduates with a few years of training and experience working at top companies in New York, Boston, California, etc. Candidates like these are music to a potential employer’s ears because they have the top-notch education and experience as well as commitment to Miami as “home.”

About a year ago, one of my daughter’s friends from Miami working at a New York private equity firm called me for advice. We decided she should talk to Baptist Health, among others, and I connected her to one of my contacts who helped her navigate Baptist. The result: She received a job offer and returned to Miami, which is great for her, for Baptist, and for Miami.

Similarly, our youth will be much more likely to return to Miami if they believe they can access quality introductions and opportunities to pursue their careers with leading companies in industries they’re interested in such as private equity, wealth management, healthcare, technology, etc. For our biggest players in some of these industries such as H.I.G. Capital, Trivest Partners, Rialto Capital Management, Baptist, Ryder and the cruise lines, to name a few, qualified candidates like these are worth their weight in gold. Considering our growing startup scene, we can also encourage candidates to return to Miami to start businesses and help them navigate the local environment.

Personal introductions and referrals are highly beneficial for all parties involved. Vehicles like job-posting websites aren’t the most effective tools for either applicants or employers. In a saturated ecosystem like ours where résumés abound, recruitment processes can often feel like crapshoots for both parties.

Based on my experience, I know there is significant opportunity in networking to help bring quality talent and employers together. Miami offers many networking opportunities for business leaders and candidates, including professional organizations, local meetups and other events, and social networking websites like LinkedIn, which, unlike the aforementioned and quite transactional job-posting websites, facilitate discussions among like-minded individuals in similar and adjacent verticals, fostering meaningful and organic connections. Networking can also connect candidates with companies that may not be seeking to fill immediate vacancies but may be looking for good talent who can provide distinct value to organizations. A classifieds website cannot help anyone forge such deep connections.

Without a doubt, rather than applying their knowledge, skills and talents to grow other regions, our youth should be focused on investing those valuable assets here and supporting our city’s ongoing growth. They will be much more motivated to do this if they know they will have the platform and access they need to succeed here. Recognizing this, now is a good time for us to ask ourselves how we can contribute, and, most importantly, take decisive action to help. We must bring our children home.

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. www.casselsalpeter.com

 

 

 

 

How South Florida entrepreneurs can find and access the right funding

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By James S. Cassel
Special to the Miami Herald
February 15, 2015

cassel

With a growing entrepreneurial community in South Florida and increased access to a wide array of funding sources, companies seeking to raise capital have no shortage of options and resources locally and nationally. The key is creating a compelling investment story and setting realistic expectations regarding the time it will take and the valuation you will receive.

Governmental and nonprofit entities are encouraging the creation of new businesses. South Florida has a growing number of early-stage funding options including incubators, accelerators, angel groups, individual angel investors, and strategic business partners. Identifying the best-possible partners/investors is critical to your success. Doing so requires knowing which qualities will complement your goals, strengths, weaknesses and verticals. By researching the possible funding sources, you can better position yourself to find the right investors. Not every type of deal is good for all investors. For example, investors who like technology deals might not like biotech deals.

In South Florida, there are various places you might look for funding. The oldest local angel group is New World Angels. There’s also Accelerated Growth Partners, Scout Ventures, and Krillion Ventures. Venture Hive may supply small grants, office space and mentoring, while Rokk3r Labs might supply development, skill and technical expertise. There are later-stage investors like H.I.G. BioVentures, a life sciences fund, and Medina Capital. This is the tip of the iceberg.

Businesses are also participating in early-stage investing to stay on top of emerging trends. Strategic business partners can be solid mentors. For example, Kaplan Inc. invests in entrepreneurs through its Kaplan EdTech Accelerator, primarily in the education space.

South Florida is a good place to start, but smart entrepreneurs will look beyond the local market to find the right financial partner or investor. The National Venture Capital Association provides many entrepreneur resources, including lists of investors. Active local investors from out of town include Arsenal Venture Partners and Summit Partners.

Before contacting investors, entrepreneurs should develop a strong investment thesis and set realistic expectations. Fundraising takes time and involves many ups and downs. Entrepreneurs should be open to all partners, advice and offers. After many meetings and ideally multiple offers, they may be in the position to begin selecting the right financial partners. Often we see entrepreneurs regretting their decisions to reject strong offers that they had received early on when their valuation expectations were unrealistic.

Again, the investment story differs from the customer story. For first-time entrepreneurs, mentors may help with crafting the investment thesis. South Florida has a strong and growing mentorship ecosystem. The Knight Foundation is funding mentorship organizations such as Endeavor and the Enterprise Development Corporation. Smart entrepreneurs might seek out the many local events and cafés where early-stage investors congregate.

Nothing helps valuation and palatable deal terms like tangible validation such as revenue and customer agreements. We recommend self-funding (bootstrapping) or asking family and friends to provide support before seeking outside funds. Working entrepreneurs who want to start businesses should consider keeping their jobs while building their businesses on the side.

Another consideration is where you’ll be located. Until recently, it was assumed that success required a Silicon Valley or Boston home base. That’s no longer the case. Abundant and generous local resources are changing the dynamic of uprooting and are helping keep startups in South Florida.

When you’re considering where to locate your company, remember you’ll also need to tap into quality intellectual talent. The good news is South Florida’s brand, lifestyle and tax rates are attractive to a high-quality talent pool that continues growing, especially as the region continues gaining visibility and positioning as a tech hub.

It’s also not uncommon for companies to establish headquarters here and have team members based throughout Eastern Europe, South America or other places to take advantage of lower costs of quality labor and development so they can come to market less expensively and more quickly. South Florida can be a great point of entry to the U.S. market.

Given the variety of options for funding startups, the decision-making process can be overwhelming. Do not marry the first financial partner who serenades you or say “no” after one date or two — take the time to identify the right partners and confirm whether you need any partners at all. It’s always smart to seek assistance from consultants with deep experience in your industry and in guiding companies through the funding process.

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. www.casselsalpeter.com

 

 

 

 

Key changes in 2015 that may impact your business

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By James S. Cassel
Special to the Miami Herald
January 18, 2015

casselNo matter what vertical your business operates in, there is a strong likelihood this year that higher interest rates, lower unemployment, increasing demand, and decreases in the prices of oil, as well as increases in commercial real estate costs and healthcare, will affect your business in one way or another. It will be important for middle-market business owners to keep a close pulse on these changes and take the necessary steps to ensure their businesses are prepared.

▪ Interest rates: The Federal Reserve has continuously indicated that interest rates will begin to rise in 2015 — perhaps 50 basis points or more. Thus, take the time to consider how an increase may impact your business. Evaluate your borrowing needs and costs and consider your cash management systems. Furthermore, while there have been little to no yields on cash during the past several years, rising interest rates could create a new opportunity to get increased yield on your cash. Cash management will begin to reemerge.

▪ Unemployment: At the close of 2014, unemployment rates stood at 5.6 percent (the lowest since 2008), and they’re projected to drop another half-percent by the end of 2015. Lower unemployment rates generally mean that companies have to work harder to attract and retain quality talent. For example, salary studies show that 2015 salaries are projected to increase by 3.8 percent for professional occupations. In light of this, examine your employee compensation packages and the other benefits that you offer your current and prospective employees. Comprehensive benefits and 401(k) programs with a match and flexible scheduling are all ways to make employees happy and help ensure they stick around. See whether options or other equity components might be appropriate. Consider offering benefits that bring additional value to the employees, such as flexible work schedules and upward mobility.

▪ Increasing demand: The U.S. economy expanded at a 5 percent seasonally adjusted rate during the third quarter of 2014, and the U.S. economy is coming back strong even as the rest of the world slows down. U.S. GDP growth was the highest since the third quarter of 2003. This may result in increased demand for your products and services domestically. As part of your 2015 business planning and strategy, you may consider how you can capitalize on this increased domestic demand and sales momentum. You might consider restructuring your sales force and incentives, increasing pricing and points of distribution, implementing innovative digital marketing strategies to further stimulate demand and capture sales, etc. Be mindful of the weakness in Europe and other areas abroad. If your demand is not domestic, be extra careful.

▪ Technology: It’s always important to evaluate your technology and confirm whether it is meeting the needs of your business and your customers. As more systems and processes continue to become computerized and automated, you should determine whether and how this may impact your business. Pay particular attention to how mobile can affect your business. Also, evaluate if you’re accessible to your customers and meeting their needs wherever they may prefer to reach you, such as in social media channels. At the same time, it’s also important to consider how you could leverage new technologies for production, marketing and sales. Also, if you have complex internal processes, determine if your work flow could be streamlined through the implementation of more tech-savvy systems, marketing automation, and customer relationship management software. Lastly, be sure that your staff members have the right tools and training in order to maximize efficiency.

▪ Oil prices: Gas prices have been dropping, and some experts are speculating that the economy might experience some deflation but at a minimum reduction in certain costs. This is something to watch for, particularly if some of your costs are tied to the price of crude oil or its byproducts. Will your business still have pricing power in the event of deflation? Also, can and should you maintain your prices even if some of your costs are dropping? By way of example, look at the airlines that have lower fuel costs but are showing no signs of dropping their fares. Keep in mind that other costs may fluctuate, so be sure to consider all possible factors when making these decisions.

▪ Healthcare costs: There’s no doubt that healthcare costs are going up. Some firms are reacting by raising their insurance deductibles, copays or the contributions by employees toward premiums, which might mean that more people will wait to get treatment until they’re very sick. A sicker staff can weaken productivity, so you might want to explore other ways to mitigate the rising costs of healthcare without increasing deductibles through your group plan options, HMOs, or covering the inflation as a cost of doing business and helping your employees.

▪ Commercial real estate prices: While there’s certainly a major boom in residential real estate construction in South Florida, few new office projects are under construction or planned in the near term. This scarcity could affect your rent, so look at your lease arrangements and be prepared to be flexible when your lease comes due. Give yourself as much lead time as possible.

The unknown may be the real effect of lower oil prices and other unknown world events. While on the one hand this means lower costs, on the other hand this could lead to less exploration and more job cuts not only in the oil business but with all the suppliers and ancillary businesses like steel suppliers.

By keeping a close pulse on these key changes in 2015 and planning, you can help protect your best interest and ensure your business is in the strongest position in 2015. As always, it’s important to consult trusted professionals with subject-matter expertise who can help you develop the right strategic plans to overcome the obstacles and seize the opportunities.

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 can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com

Why Florida is the 5th-best state for entrepreneurs

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By Celia Ampel
December 22, 2014

Florida is one of the best states to start a business, according to a Small Business & Entrepreneurship Council report released this month.

Ranjini Chandirakanthan Director

Ranjini Chandirakanthan Director

The state ranked fifth for its entrepreneur-friendly policies, after South Dakota, Nevada, Texas and Wyoming. The Washington D.C.-based nonpartisan research organization ranked states based on small business-related taxes, regulatory environment and government spending.”From a federal and state tax standpoint, [Florida is] a very attractive place to start businesses, or frankly, to relocate businesses,” said Jim Cassel, chairman and co-founder of Miami investment banking firm Cassel Salpeter & Co.

After all, the state doesn’t take personal income tax, estate tax or inheritance tax — but that’s just one piece of what will draw entrepreneurs to Florida in 2015, Cassel said.

Here are three reasons South Florida entrepreneurship experts believe small businesses will grow here in the coming year:

Venture capital and angel investors are moving in.

This year, venture capital firms Scout Ventures and Richmond Global Ventures opened offices in Miami, demonstrating national and international interest in the South Florida startup scene.
But that’s just the beginning, Florida Venture Forum President Kevin Burgoyne said.

“Just in the last three weeks, I’ve had meetings with four different venture investors who are in the process of opening offices in Miami,” he said.

As more investors set up shop in South Florida, there will be less reason for startups to move outside the state, Burgoyne said.
“There’s always been a little bit of money in South Florida,” he said. “But money that is willing to invest in early- and mid-stage companies often comes from outside the state, and there is an increasing amount of money that is based here in Florida. That’s very encouraging.”

South Florida entrepreneurs have more resources than ever before.

It’s more than just money, said Ranjini Chandirakanthan, who leads the technology practice at Cassel Salpeter & Co. South Florida entrepreneurs have more access to mentorship, workspace and other resources than ever.

“Money, culture [and] access to human capital all make an ecosystem,” she said. “And I think it’s here. For the savvy entrepreneur with a great idea, I think it’s easier to tap into that network here.”
Coworking spaces like the LAB Miami, accelerators such as Venture Hive and scores of other organizations and events have helped change the landscape for local startups, Burgoyne said.

“It really is just remarkable what resources are available — in almost all cases, at little or no cost to an entrepreneur,” he said.

Local universities are training the next generation to think like entrepreneurs.

South Florida’s universities are focusing resources on entrepreneurship through startup resource centers and world-class researchers, Cassel said.

Florida Atlantic University opened its Tech Runway accelerator this year, while Miami Dade College announced plans for its Idea Center.
Opko Health CEO Dr. Phillip Frost has also put his checkbook into recruiting top-notch researchers to the area, Cassel said.

“Unlike LeBron, they really do bring their talents to South Beach and stay,” he said.

Hiring, training and managing employees for outstanding results

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By James S. Cassel
Special to the Miami Herald
December 14, 2014

 

Although most business owners recognize that success depends in great measure on their employees, many do not fully understand how to hire the right team members and train and empower them to perform at their peak.

If you want to build a world-class company that will last, and you rely on human assets to achieve success, it’s important for you to correlate your business goals to the types of team members you need to help you succeed.

For example, this means much more than employing accountants at your accounting firm — it requires identifying your key performance indicators, the quantifiable values and skills that rise and fall with your business success, and making strategic hiring decisions based on these considerations.

 

If your customers spend more in months when you’re receiving high customer service satisfaction ratings, then you should be hiring team members with phenomenal customer service skills as well as technical knowledge.

In most cases it will not be so obvious, and even when it is, how do you gauge customer service skills based on résumés and interviews? You may be better served to rely on tools such as skills and aptitude tests. There are many to choose from.

For example, Publix is widely renowned for its customer service, and that’s no mistake — when applying for a job there, applicants complete aptitude tests that assess how they might react in different customer service situations. This process determines those applicants who already have certain predilections that correlate with strong service.

For more active or specialized recruiting efforts, keep in mind that your prospects’ personal lives should be compatible with the professional lives they’re expected to maintain. When recruiting managers, directors and C-level executives, watch closely: personal demeanor can typically reveal a good deal about what type of professionals they are. You might consider having dinner with prospects to observe how they treat their spouses or significant others.

Curious about how a potential executive might manage your team? Pay attention to how he or she treats the waiter or his or her significant other in a restaurant. A condescending or overbearing guest in a restaurant is not likely to behave much differently at work, and those kinds of personalities can poison employee sentiment. All it takes is one rude or self-absorbed person with an inch of authority over other team members to create a toxic atmosphere. This rule of thumb has been vouched for by so many CEOs that it’s become known as the Waiter Observation.

Furthermore, create a positive work environment with rewards and incentives that are customized to your team members. Some associates respond best to monetary incentives, and there’s nothing wrong with that. It doesn’t necessarily mean they only care about money, or that they care about what they earn more than they care about doing a good job; in most cases, employees and managers included, salary is correlated with one’s sense of worth on the job. That’s not to say that there are not a variety of ways to incent performance, such as better job titles, internal or external recognition, and gifts. Find out what best motivates your team members to keep them fully engaged.

Pushing for results is not the only way to glean top results. People are most energized when they are able to apply their skills and flourish doing something they know they’re good at and enjoy doing. Training as well as coaching can be worth the time and expenditure. This shows that you care enough to invest in the team’s future.

You need to be in tune with these kinds of aptitudes in order to recognize hidden opportunities to empower your associates. This applies to all roles, from the bottom to the top. An excellent creative director might not necessarily be the best person to manage client relations, to supervise the team or run the whole agency.

Don’t confuse exceptional, role-specific aptitudes with the duties of adjacent roles.

Finally, people work differently. Some are myopic and others are better at multitasking. Some can take a task from start to finish with very little oversight. Others pace when they’re thinking, and others listen to music while they work. Remember, they are all people first, so don’t assume they will all take the same course of action to get the same results. Even Google Maps and MapQuest diverge on some routes, but they’ll both get you to your destination.

One last point. A mis-hire or bad team member needs to go. You do no favor for the team member or your company by procrastinating the termination.

The bottom line is that there are serious dividends to be had from investing the necessary time and resources to more strategically acquire, train and manage what in many businesses is the biggest asset, your team members. While it begins with hiring the right people, internal success depends on how well you manage them over time. If you want your team members to bring more to the table, you owe them more personal consideration than your typical annual review. If they lack the perspective to see how they fit into the big picture, let them know. They will thank you for it, and you will be laying the foundation of a powerful, more potent team capable of supporting your goals.

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 can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com.

 

Scaling business development to drive growth

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By James S. Cassel
Special to the Miami Herald
November 16, 2014

James Cassel

James Cassel

Sustainable business development is a common challenge for growing businesses, particularly those in the lower and middle markets. Several hallmarks of successful business development and growth strategies have distinguished themselves in my years of experience at Cassel Salpeter. Those hallmarks include clearly defined business development responsibilities and roles; agile, relevant technological solutions (customer relationship management); and consistent sales staff training and benchmarking, among others.

The onus of business development tends to fall to the owners/founders of smaller businesses until the companies have reached a critical threshold. That threshold isn’t clearly delineated, but it could be summarily understood as the point at which the operation of the business and the development of new business are both demanding and granular enough that the roles warrant a “conscious uncoupling.” Whether the responsibility of business development is distributed to a sales team acting under a supervisor, or to a single (or pair) of executives, largely depends on your business model, potential customer base, market size and internal dynamics.

Making matters more complicated, it is often difficult for founders to give up the business development role that they have personally handled for a long time and empower the new people. When the decision is made to delegate business development responsibilities, identifying the right personnel for the role and for your company is mission critical. While there are a plethora of potential sources to utilize when searching for strong talent, many businesses take one of several routes: relying on a current team member who can be cultivated into the role, recruiting from a competitor, or recruiting from an organization that meticulously trains its sales people. If you choose the latter, be mindful that your candidates’ organizational training is compatible with your business, goals, scope and scale.

Selecting who steers your ship is only the beginning of a robust business development program. The value of a lead will be determined by your business model, but whether you can get leads for a penny or a pound, how will your team begin qualifying, managing and screening leads? As far as customer relationship management solutions, SalesForce is a multi-industry favorite, but there may be value in a proprietary or modified CRM solution. It’s important to keep in mind that while these technologies and platforms seem brimming with bells and whistles, you’re buying a product off the shelf, and it may not fit as well as a tailored CRM solution might.

Whether you recruit or promote from within, providing ongoing mentoring, training and development opportunities will greatly enhance a successful business development program. You may decide to create an internal training process unique to the needs of your organization, or you may send your sales team to conferences like DreamForce, the SalesForce annual conference responsible for virtually shutting down the streets of San Francisco this past October with an attendee count that pushed above 130,000. It is just one of the many programs available today.

Recruiting, hiring and training your sales team is no small task for any busy, buzzing organization, but it’s crucial to see these necessary steps as an opportunity to refine your own lead management and business cultivation processes so that your newly minted sales force isn’t inheriting a broken or outdated system. Revisit your client or customer identification methods and hard-bake best practices for accessing them into your training processes. Consider your business model — if you’re selling products as opposed to selling services, your sales strategy is likely taking a different tack.

If you’re selling products, remember that distribution does not necessarily equal sales. For example, if you own a liquor company, getting your product distributed by Southern Wine & Spirits might not necessarily be huge for sales. You will still have to close the sales loop through promotions and activations, branding and awareness campaigns, otherwise your bottles are going to gather dust and eventually the person who manages inventory is going to notice that those bottles aren’t moving and may decide to replace your product with one that’s more likely to fly off the shelf.

Finally, and most importantly, stay focused on your business objectives. If you are scaling your distribution to include the likes of the Walmarts or Saks Fifth Avenues of the world, it should be because placement in those retailers will drive sales. Obtaining those distribution routes for vanity will only disappoint you and the retailers with whom you’re working.

These hallmarks of good business development are by no means exhaustive or all-encompassing, and seasoned veterans will tell you scaling business development presents unique obstacles and opportunities for every business. There are no purple pills or cookie-cutter approaches. The right solution for you depends on your business model, your industry and your organization. By taking the time to consult qualified professionals and develop the right plans and processes, you can significantly increase your chances of achieving your business goals.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com or jcassel@casselsalpeter.com.

 

Talking Turkey about Networking, Outside Investors, & Education

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By Jim Fried

November 2014

This month our show had some awesome guests.

Ivan Misner, the Founder and Chairman of BNI – the world’s largest networking organization – was fascinating. He’s often called the father of modern networking.

We discussed mindfulness and networking – being present while you are meeting someone in a networking situation. I sometimes have jitters when I am anticipating an important event. The jitters melt away when I shake the first hand. Ivan mentioned that this is common and that many people have a problem focusing during networking. Their eyes jump around the room looking for the next person to meet. I find myself doing that and simply apologize to the person I am speaking with.

Ivan also mention that it’s a good idea to make sure the back of your card is easy for people to write on. He likes to take notes on the back of the business card as soon as he meets somebody. I do the same thing. Ivan had some other great networking tips as well. You may want to check out his interview on my website.

Another great guest this month was James Cassel. He is the chairman and co-founder of Screen Shot 2014-12-08 at 6.23.03 PMCassel Salpeter & Co. a Miami-based mid-market investment banking firm.

We discussed how to fund of the growth of your midsize company. There are many businesses based in Miami that are family run that need outside growth capital. James discussed what outside investors are looking for and what the business owners could expect when they took their company to market. Solid historic cash flow and the ability to execute a business plan going forward are two of the keys.

Our discussion also touched on the current state of the financial markets as it relates to bank financing for closely held mid-size companies. Cassel said lending is still tight, but community banks are leading the way in trying to loosen things up.

I round out this month’s review with Dr. Joe Glover, who is the provost at the University of Florida. That makes him second-in-command at the state’s flagship university.

We talked about the University of Florida’s preeminence campaign. It is focused on raising dollars to take the University of Florida to the top of the public university field. Joe started out as a mathematics professor and worked his way up to Provost. As the world becomes more competitive it becomes increasingly important for Florida to have a university that’s ranked at the top. The Florida Legislature recognizes this and is funding an intensive Preeminence program for UF as it races to the top.

Joe and his team are enhancing programs ranging from the impact of big data to creative writing. Joe was fascinating but what’s going on at UF is even more interesting.

It was truly a month of great interviews.

 

James Cassel: Business Capital Options

James Cassel, co-founder and chairman of investment banking firm Cassel Salpeter & Co., LLC, recently met with columnist and radio host Jim Fried to talk about how mid-sized companies can locate and access capital to grow their businesses. The taped segment was featured on Miami radio station 880 AM “The Biz” and can be listened to by clicking the media player below.

IPO’s: To go public or not to go public, that is the question

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By James S. Cassel

Special to the Miami Herald

October 19, 2014

James Cassel

James Cassel

Everyone knows initial public offerings can flood company coffers with cash, make people wealthy, and based on my experience in investment banking, I often get asked the following question by middle-market and growth-company business owners: “Should I take my company public?”

Fact is, in recent years being public has become much tougher as a result of increased regulations requiring tremendous disclosure and compliance with the Sarbanes-Oxley Act as well as other rules and regulations. For public companies, keeping up with compliance requirements alone can cost hundreds of thousands of dollars per year. Moreover, the required disclosure could give information to your competitors that you might not want them to have. So, as you would do with any major business decision, you should carefully weigh the pros and cons to make sure this is the right step for you as well as your company.

Here is some general advice I have found to help business owners as they begin to navigate these important questions.

Although the decision-making process that precipitates a business going public is thorough and multifaceted, it can generally be boiled down to one or more of these four considerations: to raise cash for general or specific business purposes to spur growth; to have a public currency for acquisitions; to provide liquidity for current shareholders; and to use the public currency and options to recruit, incentivize and retain employees.

There also are other intangible but equally valuable benefits, such as credibility.

A successful public offering is considered a major milestone and achievement for a company. It can create a sense of corporate stability and strength. An IPO, particularly if it gets positive media coverage, also can create good “conversational capital” for companies in terms of putting them in the limelight and making them more top-of-mind among key audiences. Depending on the type of company you own, this could be very good for your business.

A Deloitte survey conducted by OnResearch, a market research firm, polled 509 executives from March through April 2014 at U.S. mid-sized companies about their expectations and plans for becoming more competitive in today’s economic environment. Of these, 8 percent said they were likely to go public in the next 12 months (twice the number recorded in the fall) and cited the following reasons for doing so: broader exposure for their brands and products (36 percent); the cost-effectiveness of equity capital (35 percent); the desire to provide liquidity for owners (34 percent); and the need for capital to fuel growth (33 percent).

According to the survey, the most common reason private companies would want to stay privately owned is the need to control or have greater flexibility in spending, which was cited by almost three-quarters of the respondents. Other reasons for wanting to stay privately owned include: the size of the organization (too small to consider an IPO); the desire to keep financial information private; and concerns about compliance with the strict regulatory requirements of being public.

How do companies go public? Though there are other avenues, companies go public primarily through an IPO or by merging with an existing company in a reverse merger. In some cases, this can be accomplished through a shell company that may or may not have cash, although that may not be the preferred way to go depending on the circumstances. Every situation is different, so it’s up to the parties to confirm whether they are getting the value they are looking for and whether there is a liquid market for stock of the company.

Bear in mind, there are all sizes of underwriters, and not every business goes public through firms like Goldman Sachs or Citigroup. Many notable middle-market investment banking firms have similar expertise for smaller offerings, such as Ladenburg Thalmann, with headquarters in Miami, Noble Investments in Boca Raton, and Maxim or Aegis Capital Corp. in New York City, to name a few.

Each might look at different size offerings and each may have a different industry focus.

While the costs of going public are as voluminous and complex as the reasons, a few stand out as unavoidable and considerable expenses. Chief among those are legal expenses, accounting fees and investment banking fees as well as the internal costs of manpower. Many of these costs are ongoing. So in addition to the upfront costs of going public, there are costs of staying public that businesses incur when they make this transition. The rigors of the IPO regulatory process require tremendous disclosure and require much time and attention. The costs of staying in compliance can easily run from several hundred thousand to more than a million dollars per year in additional expenses.

With this in mind, it’s crucial that companies approach going public with a clear picture and realistic expectations. In an ideal world, companies should spend time working with a financial advisor with experience in public offerings to evaluate the offering options that might be available as well as the most appropriate parties to consider working with. There is no linear path to a public offering, but intelligent planning and forethought can make navigating the process more manageable for companies of any size and help ensure they minimize the obstacles and maximize the benefits.

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 can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com