I recently sat down and talked with Scott McDermott of New Harbour Partners LLC, a private equity investor and provider of executive advisory services to small and mid-market companies, about approaches and tools currently used by leadership teams to manage business performance during these highly volatile times. In summary, leaders are focused on managing and monitoring the fundamentals: organizational performance, marketing, sales and people.

Did you notice operations was conspicuously missing from that list? That’s because at the initial downturn of this roller coaster ride companies quickly adopted a “more with less” mentality. Pulling cost and inefficiencies out of their operations was the top priority accomplished through business process re-design, lean value stream mapping and downsizing the workforce. Further reductions now could put their core capabilities of designing, building and delivering product and services at risk. So, now more than ever leaders are focused on growing the top line.

On the marketing front firms are focused on revitalizing their branding, exploring different market and customer segments to uncover new opportunities and reworking their pricing models given severe margin pressures. At the top of the list however are customer retention and the expansion of product and service offerings to existing customers since new customers can be difficult to acquire. Good old fashioned face to face conversations, focus groups and satisfaction surveys work very well for gathering insight into the customer psyche. Another business performance tool is building customer loyalty programs perhaps through incentives or reward programs. Done well, the result can be growth of market share.

Along the line of sales management fundamentals, naturally leaders monitor key metrics along the sales cycle. However they are keenly interested in facts not intuition. They also want to know what’s behind the metrics, what’s driving them and potential scenarios that could help or hinder their confidence in forecasts. Companies are increasingly likely to use customer relationship management tools for capturing lead generation and forecasting data.

On the people front, many companies have taken to revisiting the core capabilities needed from their workforce since they may have changed due to business strategy changes. Investments to hire new employees with different skills and developing new skills among existing employees are steps taken by progressive minded companies.

As for the big picture dashboards, where key performance indicators are monitored on a regular basis, are commonly used. The indicators requiring improvement may warrant use of clear, focused and objective diagnostics provided by outside experts. While this roller coaster ride is not close to ending, there are proactive approaches to better managing the bumps along the road to recovery.

Scott is a volunteer on ACG Boston’s Corporate Development Forum Program Committee.

Carol Bergeron

BERGERON ASSOCIATES

Workforce Planning & Integration | Management Development | Human Resources

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Ares Capital Corporation (NASDAQ: ARCC) announced the completion of its public offering of 22,957,993 shares of common stock at $12.75 per share for gross proceeds of $292,714,411. The base offering was increased from its original 19,000,000 shares due to strong demand. Ares Capital expects to use the net proceeds to repay outstanding indebtedness under its revolving credit facility and for general corporate purposes, including to fund investments in its investment backlog and pipeline that, as of January 21, 2010, were approximately $137.7 million and $214.9 million, respectively.

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“TM Capital’s intimate understanding of the intelligent infrastructure sector, solid industry relationships and buy-side expertise accelerated our acquisition efforts in this smart grid initiative. We look forward to working with the TM Capital team on additional acquisitions in this sector.”
- Larry Mock, Managing Partner, Navigation Capital Partners, Inc.

TM Capital continues to leverage our buy-side expertise, deep industry knowledge and strong relationships to assist clients in achieving their strategic and financial objectives.  In recent years, numerous strategic acquirors and financial sponsors have capitalized on TM Capital’s knowledge of the Intelligent Infrastructure sector to identify high quality targets and build game-changing platforms within this fast-growing space.

Most recently, TM Capital advised Navigation Capital Partners, Inc. (NCP), an Atlanta-based private equity firm, in its acquisition of Specialized Technical Services, Inc. (STS), a leading provider of smart grid infrastructure services to utilities.  After partnering with an experienced executive-in-residence, NCP retained TM Capital as exclusive buy-side advisor to pursue building a leading platform in the Intelligent Infrastructure sector.  TM Capital assisted NCP in refining its acquisition strategy, identifying and analyzing potential targets, and qualifying opportunities through a comprehensive contact program.  Following an exhaustive canvassing of the industry landscape, TM Capital and NCP identified STS as a top-tier target which aligns well with NCP’s investment thesis.

STS, headquartered in Richmond, KY, delivers a wide range of solutions which enhance a utility’s ability to monitor and manage assets, including contract meter reading, Advanced Metering Infrastructure change outs, project management for mass meter deployments, Automated Meter Reading retrofits, meter calibration, testing, lab services, and related data management services.  STS will serve as the platform upon which NCP intends to build an industry-leading provider of field and data management services to utilities and smart grid technology providers through targeted acquisitions.

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By Larry Blumsack, President, Zoka Institute
Larry guest blogs a Should Have Been There column for ACG.

Depending on one’s perspective, the M&A outlook at best for 2010 is a mixed bag. The group of investing professionals that included the keynote speaker and panelists for ACG’s Dealmakers 2010 Outlook Conference last Thursday at the Park Plaza Hotel painted a clear and vivid picture for the 400 attendees of what the deal will be in 2010 and beyond. And it was not a good deal.

Keynote speaker Bruce Johnstone, Managing Director and Senior Marketing Strategist for Fidelity Investments is a funny, articulate and impressive speaker. Even with his ability to present depressing and compelling economic statistics with great humor the mood at the conference during his presentation was quite somber. He does project economic recovery, however, only for the next year and that the following ten years will be different. The caveat is that for the short-term recovery in 2010, we need to shake hands with the feds because the Federal Government is now the economy’s partner.

Johnstone points out that we are out of a lot of wealth in this country and that the U.S is the world’s largest debtor. To pay for the current $12-15 trillion federal outlay, the only place the government is getting the money is by having the Federal Reserve create money by printing it. The result is the only bull market is in government. The looming issue is, how are we going to pay for all this in the future? On one hand the government got us into this mess because of too much debt, so why are they creating more staggering debt to get us out of the mess? Johnstone projects that by 2016 the entire Federal budget will be interest costs.

He went on to point out that although 70% of the economy is consumer spending the consumer is broke because their assets have been destroyed. The net worth of the economy has been cleared out. The purchasing power of the U.S. dollar is down 94% since 1933. He sees the start of new business as the driving force of our economy. Unfortunately, with the government as the economy’s partner they pick and choose who wins – firms, states, interest groups. The result is the government gets in the way of risk-taking and spending incentives.

So what is the upside? Johnstone outlined his personal portfolio. He invests 1/3 in gold, energy, intra-structure, armaments, alternative energy, water, agriculture, fertilizer and synthetic biology; another 1/3 emerging markets and the final 1/3 in cash, private equity, venture capital, and residential real estate. His tongue-in-cheek advice was the way to get by in this economic climate is by late retirement or early death.

Panelists Hiter Harris, Co-Founder, Harris Williams & Co.; Tom Stemberg, General Partner, Highland Consumer Fund; Lee Tesconi, Partner, Lexington Partners; and Corbin Walburger, Vice President of Corporate Business Development, Stanley Works were in agreement that although it is tough to get equity out, Asia was the new focus.

Led by moderator Laura Kreutzer, Private Equity Analyst for the Wall Street Journal, the panelists see the issue to overcome in the U.S. is valuations. Owners have little incentive to sell because multiple levels are lower than ever before unless they are desperate. Also, buyers have to be more innovative in financing with an average of 50% equity needed for a deal today. This has made club deals a necessity. Some on the panel do see a recovery in the capital markets but nothing dramatic.

It was also clear from the majority of the panelists that buyout firms need to get back to adding value to their portfolios. The era of the leverage game is over.

So what if any was the positive megatrend? Johnstone and the panelists projected megatrend will be in emerging markets.

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Wellesley, MA-based Tully & Holland, Inc. is pleased to announce another successful sell-side M&A assignment in the direct marketing sector. Tully & Holland initiated and advised Casual Living USA, Tampa, FL in its sale to the Boston Apparel Group, a portfolio company of Monomoy Capital Partners, L.P., New York, NY. Boston Apparel Group is a leading catalog and internet retailer of women’s apparel sold under the Chadwicks™ and metrostyle® brand names.

Casual Living, a multichannel marketer of casual women’s apparel was founded in 1953, and bought by the Franzblau family in 1989. The company, one of the Franzblau’s three direct marketing companies collectively known as the Thompson Group, successfully transitioned from a gift catalog to a leading women’s apparel multichannel merchant over the past few years. Casual Living is the first acquisition for Boston Apparel Group since Chadwicks™ and metrostyle® were purchased by Monomoy Capital Partners in 2008.

With this acquisition Boston Apparel Group recognized the opportunity to expand their product offering and diversify their customer base while complementing Boston Apparel’s Chadwicks™ and metrostyle® brands. According to David Myles, the Chief Executive Officer of the Boston Apparel Group, “Casual Living has developed a top-tier product offering and a loyal customer base over the past five years. In a difficult retail environment, the addition of Casual Living will substantially expand Boston Apparel’s unique ability to provide consumers with the right products at the right price points every day.”

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Stonebridge Associates is pleased to announce that it served as exclusive financial advisor to Active Shock, Inc. (ASI) in its sale to General Kinetics Engineering Corporation (GKE).  GKE, a leading manufacturer of suspension components and systems for military vehicles, acquired ASI, a provider of semi-active suspension and vibration control systems, for an undisclosed amount on December 31, 2009.

A boutique investment bank serving emerging growth technology companies, Stonebridge Associates worked closely with ASI to evaluate preemptive inquiries made by several strategic buyers, structure an overall transaction framework, negotiate deal terms and conditions, and manage the due diligence and closing processes.

Bill Larkins, President of Active Shock, stated, “In the face of challenging market conditions, Stonebridge provided an exceptional level of service and expertise – facilitating a strategic transaction that offered an attractive return to shareholders, improved our competitive position and positioned us to accelerate our growth.”

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Call for Nominations – Junior Achievement Boston Business Hall of Fame.  Come celebrate with Boston’s most illustrious people – including you! Registration begins at 7:30am, Networking until 8:15am.  Program begins promptly at 8:15am.

Please join the Junior Achievement Boston Business Hall of Fame as we honor exemplary Massachusetts individuals and companies.  Through a process managed by Accenture’s Institute for High Performance, honorees will be selected for induction into the JA Boston Business Hall of Fame based on their outstanding accomplishments within their own industries and their contributions to the local community.

Nominations now open!
Click here to nominate!

Nominee categories

Individual: Nominate an outstanding individual who has demonstrated both excellence and leadership through extraordinary commitment to the community.

Company: Nominate a company that excels in the following three categories: commitment to community, investment in work readiness, and notable success within the free enterprise system.

Accenture/JA Technology Innovation Award: Nominate a company that has creatively and innovatively implemented and utilized a technology solution to benefit its own business, other organizations and/or the broader community.

Sponsorship Opportunities are available by contacting Barbara Foley: bfoley@ja-easternmass.org or 617-368-3566.  Thank you!

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Lineage Capital’s third-party logistics (3PL) portfolio company, Veeco Holdings LLC, is pleased to announce that it has expanded its footprint to the West Coast by purchasing certain assets of MegaTrans Logistics Inc. and leasing new warehouse space in Torrance, CA, to serve the port of Los Angeles/Long Beach.

Veeco CEO Michael Arciero comments, “Importers of all kinds of consumer goods value a bi-coastal solution for their logistics and supply chain needs.  Veeco has for years enjoyed an excellent reputation in the New Jersey/New York market, and we are now well positioned to extend that market position to the West Coast and provide our customers a national solution.”  LA/Long Beach and New York/New Jersey rank #1 and #2 as entry points of consumer goods imports into the United States.

Elton Chung, founder and CEO of MegaTrans, will be spearheading the Company’s business development activities on the West Coast.  “By working closely with Veeco over the past two years to serve common customers, I have seen firsthand the Company’s commitment to quality.  This focus on giving customers the highest service levels made Veeco an excellent partner for MegaTrans.  Together we have an exciting opportunity that will benefit our customers and to our employees.”

If you have another acquisition opportunity that would fit with Veeco, please contact Steve Glick at 617.778.0668.

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Employee stress levels are up and most stresses are accompanied by financial concerns. Just ask any Employee Assistance Program (EAP – a benefit which includes short-term counseling and referral services for employees and their household members for personal problems that may impact job performance, health, and overall well-being) and they will tell you:
•    EAP inquiries are up in all major categories : personal issues like marital & relationship concerns, family issues, overall stress, depression and anxiety; financial and legal issues hovering around credit & debt, foreclosure prevention, money management; job related concerns including job security, poor concentration, career issues, workplace dissatisfaction, conflict with management and declining performance; addiction and child and eldercare.
Those results are not surprising given the state of the economy over the past two years. Add more uncertainty like a pending acquisition where a common response is “It was just announced that my company is going to be acquired by ABC Company, so now everyone is scrambling to develop contacts just in case .”  Well M&A folks, you have your work cut out for you.  So, what should you do?
1.    Get your communication strategy in order and hopefully you started back in due diligence.
2.    Prepare the managers at the target company so they can coach employees on practical things like:
a.    The rationale and logic behind the acquisition and the background of the acquirer
b.    Disclose how success of the acquisition will be measured
c.    Build enthusiasm by connecting employee contributions with success measures
d.    Share the new organizational structure and be honest about the unknowns
e.    Talk about the challenges of the new combined organization and those you face as the company being acquired
f.    Reinforce that the best things we can do both individually and collectively is to (1) produce the same or better outstanding results that we always have, (2) work cooperatively with employees of the acquirer since we are all on the same team working toward the same goals and (3) be objective and open minded since no doubt some of our core business processes and tools will be revisited
g.    Opportunities that may arise out of the transaction which is why it’s best not to make any hasty employment decisions on anticipated rather than actual employment experiences
h.    Acknowledge the natural emotional reactions folks might have given uncertainty and encourage folks to direct that energy to building a better combined company
i.    Changes in people practices produced by the transaction
j.    Identify how frequently folks can expect an update and who the “go to” people are for follow up questions
k.    Touch base with employees one-on-one to better understand their personal concerns so that you are in a better position support them
3.    Get executives from the acquirer involved in the meetings so that employees begin to get flavor for their management style and philosophy
4.    If the rumor mill roars, usually due to employees filling in the informational gaps, then your communication strategy needs more work and more frequent forums

Carol Bergeron

BERGERON ASSOCIATES

Workforce Planning & Integration | Management Development | Human Resources

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Allergan, Inc., a leading multi-specialty healthcare company, acquired Serica Technologies, Inc. (Serica), a developer of silk-based biomaterials for aesthetic and reconstructive applications. The transaction did not include rights to Serica’s orthopaedic or veterinary products, which have been spun-out to a new company, Alacer Technologies, Inc.

Stonebridge Associates, a boutique investment bank serving medical technology companies, served as exclusive financial advisor to Serica in this transaction. Led by Mitch Briskin, the Stonebridge team worked closely with Serica to structure an overall transaction framework, negotiate deal terms, and manage the due diligence process. “Stonebridge was engaged to pursue a multi-path process that included co-development, licensing, and strategic sale alternatives, as well as potential division of the product opportunities. Ultimately, we were able to structure a transaction that provided Allergan with rights to the markets they desired, an attractive financial return for investors, and an opportunity to continue exploiting the potential of silk-based biomaterials in orthopaedic and veterinary indications,” said Briskin.

Dr. Greg Altman, President and CEO of Serica, stated, “Not only did Stonebridge possess in-depth knowledge of the strategic participants in our target markets, they offered sound business and transactional advice that was instrumental in achieving a successful outcome for all stakeholders.”

Said Stephanie O’Brien of Morningside, the lead investor in Serica, “It was clear from our first meeting that Stonebridge Associates was the right team for Serica. Not only were we tremendously impressed by the caliber of their work, we are very pleased with the return to investors. Allergan was the right buyer for this technology and we are excited about the potential for the retained orthopaedic and veterinary applications.”

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