Falls River Group Newsletter

Welcome to the Falls River Group Newsletter

Reflections from the Chairman for Summer Beach Reading


As we fly through our 24th year, on our way to the anniversary of our founding 25 years ago in October, 1992, allow me to reflect a little. Particularly here in Naples, many people we meet ask me if I still work. Well, the answer is yes and no.  Most days it never feels like work. It is so much fun helping people obtain liquidity from their life’s hard work  in building a business that, on balance, the days, weeks, months, and years race by. The variety of businesses we meet, and the wonderful people we are privileged to know each day, has been a joy and an education.
 
Peter Drucker said, “Culture eats strategy for breakfast”, and as I reflect on the similarities and differences of our various clients over the years, one thing stands out, that they all had in common – EXCELLENT COMPANY CULTURE.  Deep integrity, deep commitment to customer service, and a sense of urgency. The executives/owners of these companies “walked the talk” and have told us that the team at Falls River Group really helped them through the SALE PROCESS, one of the most difficult things they had ever done.

Interestingly, most, if not all of these people, have become friends and remain in touch with us. I/we are very lucky and grateful to know each and every one of our clients.  If you are one who is reading this: THANK YOU!  If you are not a client, please get to know us. If you are a friend or a referral source, know that your TRUST in us will be honored. If you have been the Buyer of an FRG Client in an FRG Sale Process, then you know that the culture and people are the best, and you made a good deal. If you hope to buy a company represented by FRG, sharpen your pencils, great companies do not sell below market price.

Besides the question of my own work, another major question I get is:
                                 
                                            “What is the Market like now?”

As we have been saying for 3 years – it is terrific. Sellers of quality companies are able to command premium prices through a SALE PROCESS. (Note the one-off buyer who shows up and says they will pay you $XX,000,000 never pays “market”.)

The terrific market is driven by:
  • Competition via the Sale Process
  • Historic low interest rates and good borrowing availability allowing leverage
  • Historic levels of Cash Equity in private family offices, private equity groups and strategic buyer balance sheets
  • An inadequate supply of quality companies ready to be sold (a sellers market)
  • Overall Confidence in market conditions
The last factor is the most fickle of them all.

Overall market conditions include the following:
  • An individual company’s industry and competitive factors
  • General industry and competitive factors
  • National industry and competitive and political factors
  • Global industry and competitive and political factors
Positives and Negatives - A Few Thoughts:

California, Connecticut, Illinois, New Jersey, New York, Pennsylvania and Puerto Rico, among others, have unsustainable public pension schemes, and are “kicking the can down the road”, this will not continue to work. There is not enough “tax on the rich” to make any of their economic problems repairable. This will roil financial markets.

Retail bricks and mortar did not see the Amazon Effect coming and few have figured out how to deal with it. Click to view Wall Street Journal article: Sears to sell Kenmore Brand on Amazon

The impact of retail bankruptcies and real estate re use, etc., will roil financial markets.

Healthcare in the US is consuming 10% of our GDP, more as a percentage than any other country. Major changes are coming in all aspects of healthcare as the result of:

  • Funding – whether Obamacare gets repealed and replaced or not
  • Technology – the iPhone effect alone and WATSON, etc. (this is actually a positive) For more see this recent article: Prescription for the Future (The Economist, 4/8/17)  
  • Aging population and aging systems for training physicians

These changes to healthcare will roil financial markets.

Higher Education in the US is in serious trouble. Most colleges and universities are overpriced and uneconomic. Many will need to go out of business during the next decade.  Like healthcare, they are facing issues dealing with:

  • Funding: they can no longer pass along their soaring costs of their bloated budgets to students, (also watch donors dry up at SANCTUARY UNIVERSITIES).
  • Technology: massive open on-line education, and better use of the internet and virtual reality and telecom tools will allow real students to learn from the best teachers. Many mediocre professors will have to find new work. For more, click on our link to read Alana Dunagan's opinion piece: The Innovator's Dilemma Hits Higher Ed (WSJ, 5/16/17)
  • For higher education, this means that Distressed M&A will occur with some cases where smart Boards assess whether or not they are survivors and act early. The ‘winners” will be high quality boards, who, if they chose to grow and survive, can acquire the major assets, Alumni and Endowments, leaving behind Legacy, Real Estate and Faculty Obligations (more on this subject in a White Paper from Falls River Group soon).  

These bankruptcies will roil financial markets.

Amazon is affecting Industrial Distribution too!

  • The Media and the industry have been playing down the effect of Amazon Prime on the Industrial Distribution sector.
  • W.W. Grainger, a sector leader, reported a 22% decrease in 2017 earnings from 2016, and faster closing of branches, despite the fact that many of Grainger’s products cannot yet be bought on Amazon.
  • Note: Amazon could buy its way into industrial distribution just like it is into Grocery retailing, with its proposed Whole Foods acquisition.

The Amazon effect on Industrial Distribution will roil financial markets.

But the most POSITIVE factors of all are still to come:

  • If the US can pass Health Care Reform; then
  • We should be able to pass Tax Reform; and
  • Address our infrastructure needs
We are already seeing positive economic benefits, with 2% growth, 222,000 jobs in the latest month and a decline in disability and unemployment roles. The flood of new, unnecessary progressive agenda regulations has been greatly stemmed.

Can you imagine the engine of the US economy when our entrepreneurs are allowed to do business without both hands tied behind our backs, by regulations new and proposed, and then taxed every possible way at every level when they succeed?

So, have we given you enough to think about? I hope so. You are the result of your decisions (Stephen Covey).

Del Wilber joins FRG as Strategic Consultant

We are delighted to share this news!  A longtime friend of the firm will be joining us as a Strategic Consultant. Del is a very interesting man on many levels as is evidenced in his resume below. FRG welcomes Del to our family and we look forward to many years of mutual collaboration:

Del Wilber is President of DQW Holdings, LLC, a consulting firm working in Marketing / Branding, Private Equity and Sports and Entertainment / Media. Del also serves as President of The Perfect Game Foundation, a 501(c)(3) non-profit that assists those who aspire to a business career in the sports industry.

Past experience includes serving as an Operating Executive and President/CEO at Celeritas Management Inc. for Palladium Equity Partners, LLC. Del also served as the CEO of MVPGROUP, LLC (a sports/entertainment/event marketing company) where he partnered with The Martin Agency and The Interpublic Group of Companies. Clients included Olympus, AXA, Palm and VCU among others.

Del is a senior executive with extensive sales, marketing, and branding experience with major multinational corporations and organizations. Del founded one of the very first sports/entertainment marketing agencies in the early 80's (DelWilber+Associates) where he provided marketing consulting work for companies in the US and Canada including Coors, Chrysler, Audi, IBM, Mazda, Coca Cola, United Airlines, Westin Hotels, American Express, Dr. Pepper/7 Up, Frito Lay. During this period DWA worked closely with the NHL, the Sugar Bowl, the Holiday Bowl, the PGA Tour, the LPGA, the NFL, MLB, and several US Olympic NGBs among others.

DWA was sold to International Family Entertainment in 1996 where it went on to acquire Ice Capades, the World Pro Ski Tour, Time Warner Sports Merchandising and multiple LPGA Tournaments.

Del has also worked for Procter & Gamble, Wilson Sporting Goods and Spalding where he was responsible for the Worldwide Tennis and Squash business. He has served on many advisory and corporate boards including the Hilsinger Companies, eJets, the Spanish Beisbol Network, ANC, Gobabies, MVPGroup, Aquarius Sports, SABRE, HC Government Trust, INTENNIS,  and Evite. Mr. Wilber also served on the Boards of the Major League Baseball Players Alumni Marketing, the Krannert School of Management at Purdue University and the LPGA Tournament Sponsors Association.

Del was raised in St Louis, MO in a baseball family (his Father, Del Sr. was a 50 year man in Major League Baseball including 10 as a player with the Cardinals, Phillies, Red Sox and White Sox). He is a former Big Ten Quarterback and signed with the Philadelphia Phillies in the very first Major League Baseball Free Agent Draft. Del is a graduate of the Krannert School of Management at Purdue University.

Opinion Column: BOLD COMMON SENSE
by
Bill Jenkins

Mitch Daniels, Purdue University President, continues to solve higher education issues that most universities have not been able to address. A few examples include:

  • Student debt (only 1%)
  • Cost of higher education (no tuition increase for the last six years-through 2017/18)
  • Constantly and consistently using social media to reach out to alumni and friends with rich content concerning major happenings about Purdue.

President Daniels latest and perhaps boldest venture is acquiring an online technology company. Rather than trying to build capability and capacity internally, Purdue decided to buy Kaplan University and its institutional assets.

This should jump start Purdue’s commitment to online and global education expanding their land-grant mission “to expand higher education beyond the wealthy and elite of society.“

As Mitch Daniels says, Purdue "is a little out of the ordinary university and the same could be said for Purdue' s Leader!"

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About the Author:  Bill Jenkins retired from Huron, where he served as Managing Director for the global management consulting company. Bill's areas of expertise in the higher education industry include strategic planning, operational improvement, budgeting, organizational design, leadership, values, financial reporting, research administration, human resources, facilities management, and other administrative and financial functions.

Prior to joining Huron, Bill spent 30 years as a senior executive at the California Institute of Technology, Vanderbilt University, Cornell University, and North Carolina State University.  

Brexit: The Facts and The Fiction

We are pleased to share the second edition of Creating Value, an IMAP magazine dedicated to creating value in the M&A mid-market.  This issue features contributions from several IMAP partners who share their  insights and analysis on the latest trends in M&A and key issues concerning the market.

Particularly timely is Brett Stacey's piece on Brexit, page 10. Follow the link below to view this publication:

Creating Value: An IMAP Magazine, Volume 2

Mark Cuban, Daymond John and other 'Shark Tank' investors
share  10 things you have to do to be successful

Collectively, the investors on " Shark Tank " have been through their share of hard times en route to success. They've gained valuable perspective on what's important and how to get ahead. Here are lessons from the sharks on how to succeed.

1. Set goals for yourself
You have to set a goal . If you don't know where you are going, you will never get there, says Daymond John, the so-called People's Shark. John started with $40 worth of fabric that he turned into hats, which ultimately became  Fubu,  his $6 billion urban streetwear brand . When John identified his goal, he became focused on achieving it. He called his mom and said: "I want to make a uniform for this culture. They are rapping, they are singing, but who is going to dress them all? I am going to dress them all!"

2. Save when you're young
"The best thing college students can do right now is to stop spending their money," says Chris Sacca, a self-made billionaire, top Silicon Valley investor and repeat guest shark on the show. "Being a cheap bastard now means so much more freedom and choices later," Sacca tells USA Today .

3. Look people directly in the eyes
Barbara Corcoran was a D-student  and had 20 jobs before turning 23. She quit a position as a waitress and borrowed $1,000 to launch a real estate company that's since become a $5 billion real estate empire. When you are assessing character, eye contact is key, she says. "Looking someone straight in the eye creates trust," Corcoran recently tweeted. "If someone's not looking you in the eye, believe me, you're not trusting them."

4. Love what you do
John's ascent was possible because of his deep passion for his work. "I loved what I was doing," he says, noting that every single successful person has that one trait in common.

5. Set your own schedule
Billionaire tech investor and owner of the Dallas Mavericks, Mark Cuban, uses email instead  of in-person meetings or phone calls for everything that he possibly can. "No meetings or phone calls unless I'm picking up a check. Everything is email," Cuban  tells Thrive Global . From his perspective, email is a productivity tool.  "Love it. Live on it. Saves me hours and hours every day," says  Cuban who is worth over $3 billion . "No meetings. No phone calls. All because of email. I set my schedule."

6. Believe in yourself
You will be as successful as you believe you can be, says Lori Greiner, a retail product inventor.  She has made 400 products and is a star on QVC TV . "You're only as good as you believe you are," she says. "Believe in yourself because you're the only one living in your shoes."

7. Protect yourself
You don't want to waste time fighting identity theft or a data breach. " People assume that they're exempt from the risks of cybersecurity ," Robert Herjavec, founder and CEO of cybersecurity firm  Herjavec Group , tells CNBC. "Similarly, businesses assume it will never happen to them," he says. "It will! Cybersecurity risk is everywhere and no matter the size of your business, the data you process and ingest can be exploited for financial gain."
  
8. Be able to succinctly summarize your brand
You should always have ready a two- to five-word description of who you are  and what you are doing with your life. "If you don't know what your two to five words are, then you walk in a room and you leave it up to us to interpret," says John. The thought process should always be, "Are you populating what your two to five words are?" You should be consistently on brand whether you are soliciting funding, posting on Facebook or meeting new people. "Life is a series of pitches," he says. "You are always pitching."

9. Have fun!
If you are running a business, it will be more successful if you and your team are having fun, says Corcoran. "Having fun is the most underutilized tool in business today," she says. "Fun builds teams, and teams build business." 

10. Just keep going
"You either think like a shark or you don't," says John, who is no stranger to setbacks. "If you think that anything can hold you back, well, I am dyslexic. I am short. I got left back in school. I didn't go to college. I don't know anybody with a famous last name. I am not a relic of anybody with a famous last name." And yet, look where he is today. John's success is due to his persistence, he says . In a nod to Dory in Disney's hit film "Finding Nemo," he adds, "You must keep swimming."

By  Catherine Clifford, Senior Writer, CNBC
IMAP Partner News: Japan
Congratulations to Pinnacle, our IMAP partner firm in Japan, appointed two years in a row by JETRO as its official advisor for supporting inbound M&A.

Japan External Trade Organization, (JETRO) is an independent government agency focusing on Japan's import and export promotion. Pinnacle will be the official advisor for its initiative to bring foreign M&A and Investment to Japan. It is an honor for them to be re-selected, and serve as one of three advisors to support the Japanese government agency.
Quarterly Quotes
"Culture  Eats Strategy  for Breakfast"

We believe Peter Drucker's well known quote continues to ring true. Culture is critical for any transaction to be successful.  

This is why FRG's  process is driven by Chemistry (culture).  

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Silencing the Internal Din
Negative messages keep us from  realizing our full potential

Do you hear voices? Even when you're alone, there is someone talking to you - a near constant internal dialogue we have with ourselves. The voices in your head don't make you crazy, they make you human. But these voices have the power to make us believe some crazy things.

In 2005, the National Science Foundation published an article noting the average person has 12,000 to 60,000 thoughts per day. Of those, 80% are negative and 95% are repetitive. And yes, 80% of the 95% play-loop is negative. Do the math and you realize why so many of us are achieving only a fraction of our potential.

Click here to continue this article by Stephanie Bogan at InvestmentNews.com
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Falls River Group, LLC is a global Merger & Acquisition advisory firm based in Naples, Florida, and a member of IMAP, an exclusive global partnership of leading M&A firms providing services focused on the middle market. IMAP celebrates over 40 years of successful global collaboration with consistent ranking among the top M&A advisories worldwide. From more than 40 countries throughout North and South America, Eastern and Western Europe, the Middle East and Asia, IMAP advisers provide strategic merger, acquisition and divestiture and related corporate finance services.

For further information: www.fallsrivergroup.com and www.imap.com

Members of Falls River Group are registered representative of and securities transactions are conducted through StillPoint Capital, LLC, Member FINRA/SIPC (www.finra.org and www.sipc.org ), Tampa, FL.  StillPoint is not affiliated with Falls River Group.