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Q2 2015 Review

Trusted.   Proven.   Global.

Quarter 2, 2015  Newsletter  
Volume 5, Issue 2

I Am Your Competition
1. Every minute you are late to work, puts me one minute ahead of you.
2. Every phone call you decide not to make, places me one call ahead of you.
3. The fewer customer appointments you make, the more I have.
4. The more time off you take, the more time I have to contact your customers.
5. If you’re unprepared for a meeting or appointment, I never am.
6. Every excuse you have for failure makes me stronger.
7. When you fail to improve your skills, I’m constantly improving mine.
8. When you fail to return phone calls or follow up with customers, I never do.
9. When you start your day without objectives and goals, I’m busy achieving mine.
10. Whenever you hesitate to close a sale, I’ll close it.
Each day I am determined to beat you and win.
I am your competition.
Courtesy of Chuck Kulig, Strategic Deal Executive


Thoughts from Jack Ma, Alibaba’s

Executive Chairman

Below are several excerpts from Jack Ma’s recent article on Alibaba. Clearly these comments resonate with all of us who have seen China’s e-commerce platform emerge as the world’s most powerful on-line market places. China is, by necessity, by-passing America’s decades old infatuation with bricks and mortar. If you build it on the cloud, they will come!


“China’s middle class is as large as the entire U.S. population and may double in seven years.”


“It is important to remember that in China we don’t have the extensive bricks-and-mortar retail infrastructure common in the U.S. There are no national retail chains to speak of, and just over two shopping malls per million people – around one-tenth the rate in America. With the widespread availability of Internet access and online marketplaces, like those provided by Alibaba, Chinese consumers have leapfrogged the in-person shopping experience and are shopping online in big numbers.”

“I admire America’s entrepreneurs, who are strong role models for the world. While as a person I am 100% made in China, I feel a great kinship with the United States. I first discovered the Internet while on a trip to Seattle and learned to speak English from American tourists who were visiting China. Those tourists came to China only because of President Richard Nixon’s historic trip to Hangzhou, my hometown and (now) Alibaba’s headquarters.”



Global FX


Despite recent improvement in U.S. economic data, the uncertainty over the timing and magnitude of the Fed’s eventual tightening cycle have put downward pressure on the dollar.


We believe the improving economic and inflation environment makes September the most likely month for a first rate hike.


Therefore, the path of the USD in the near term will be highly dependent on high frequency data on the labor market and inflation.


It is important to remember that the USD tends to experience 8-11 pullbacks in an up cycle. After the strongest nine month rolling return, periods of consolidation are common.


In fact, the USD has seen 5 periods of a 3-10% pullback since 2011. The current pattern is relatively in line with history.


We believe the biggest supportive factors for the USD will be the diverging monetary policy, better growth fundamentals and fund flows.


Larry Adam, U.S. CIO and Chief Investment Strategist – Wealth Management Deutsche Asset & Wealth Management



The FRG Team

Dr. Maegan Evans,

Managing Director, 1997


Dr. David Spellberg, Managing Director, 2013


Kurt Andersen,

Managing Director, 2008


John Rowell,

Managing Director, 2013


Tim May,

Managing Director, 2015


Robert Newman, Director, Rail Practice, 2009


Erik Bindslev,

Associate, 2012


Suzanne Pahl Boland, Director of Operations, 2011


Caitlin Schubert,

Administrative Associate, 2014


A.J. Krause, Business Development, 2015


Michael Ross, Analyst, 2015


Felipe Galvis, Summer Analyst, 2015

Kerry Dustin,

Founder & CEO, 1997



Our Strategic Advisors


Jerry Bogo,

Multi-Industry, 2008


Robert McCashin,

Defense & IT,  2009


Mark Michel,

Multi-Industry, 2012


Neil Goeren, Innovation & Consumer Products, 2012


Michael Benz,

Multi-Industry, 2012


Ron Glah,

Multi-Industry, 2004 


Frank Pinto, IT,  2004

Clancey McKay,

Multi-Industry, 2014


Betsy Allen,

Multi-Industry, 2014



Securities conducted through StillPoint Capital LLC, where Amy Cross is CEO and Chief Compliance Officer. Member FINRA/SIPC.

The IMAP At A Glance Report contains regional reviews and highlights on M&A trends in the industry. Click below to view:

IMAP’s strength and premium quality service continue to allow us to offer significant value for clients under any type of market conditions.  Click below to view:

Welcome to FRG’s Newsletter


KCD 2013

Dear Colleagues and Friends:


We are very proud of our 23 year history of satisfied clients.


I reflect on all of our past deals quite often, and remember in particular a potential buy-side client we declined to represent because we thought we might better serve them by selling them part of a new FRG client’s business. Which we did.


So it brought me great pleasure to read the recent Smithers article, which mentions their first major move being the 2002 acquisition of our same client, the environmental toxicology business Springborn Laboratories Inc., a contract research and regulatory compliance firm for pharmaceutical, agrochemical and chemical industries. We later sold the pre-clinical lab business of Springborn to Charles River Labs (NYSE: CRL)

Click below to read the article by Don Detore in Crain’s Cleveland Business, 4/7/15:


Best regards,


Dental Industry Consolidation:

Musical Chairs?


A cautionary tale of the future


The last decade has seen a flurry of investment by private equity groups in dental practices around the United States.  On the surface it looks like a great plan:

  • Highly fragmented service industry with more than 150,000 practices generating $120 billion in annual revenues
  • Aging baby boomer demographics requiring increasing services
  • Creation of cost savings through purchasing scale and efficient systems implementation
  • Opportunity to increase value through multiple expansion by acquiring smaller operations at low multiples and selling a large, more efficient operation at a significantly higher multiple

So what’s the rub?  Well, the dental industry is primarily a retail healthcare business.

While there are many insurance options available to patients they typically only cover a fraction of the cost of dental treatment.  Dentists and their staff continually need to sell the benefits of treatment vs the cost of treatment to patients who often don’t understand the value of the services being prescribed. Further, the business is operations intensive, with limits to the scale achievable at each location.  The primary source of revenue production, the dentists and hygienists, walk out the door every evening, which adds a dynamic that can dramatically change the revenue flow in any given location literally overnight.


Enter private equity investors into the mix:  Private Equity Groups (PEGs) invest for growth.  The dental marketplace offers significant opportunities for growth through the continuous application of investment in new offices, expanded offices, and new acquisitions.  What it doesn’t offer is sustained organic growth opportunities in excess of GDP.  Once a practice is acquired by a well-managed Dental Service Organization (DSO) often backed by a PEG, there is typically an opportunity for significant productivity improvements in the first couple of years of ownership followed by a long-term future of nominal increases in fees approximating annual GDP growth.  Well managed groups have developed effective provider training programs that can enhance this growth as long as providers stay in place, but the turnover rate in DSO’s often blunts the impact of these efforts. A common misunderstanding among financial investors in the dental industry is that dental providers are interchangeable.   They are not at the mid to upper levels of productivity that make dental practices highly profitable.  


Many of the dentists readily available to DSO’s are young and relatively inexperienced or have been working in a corporate setting because of family or lifestyle issues that restrict their level of dedication to a practice. Both of these factors lead to lower levels of productivity in the dental office.  Additionally, as the organization matures it takes more and more capital for new acquisitions and office expansions to maintain an above GDP growth rate as the needle gets harder and harder to move and the average same store comparison stabilizes at a near GDP standard.

And now to sell…


Three to seven years from now, as many of the PEG’s who have invested in this space will find out, there will be many groups looking to create liquidity events compressing the multiple expansion that appears to be an opportunity today.


Those ready to exit earlier in the cycle will find stronger opportunities for returns than those who are late to the party where buyers will have the luxury of selection at lower multiples than today’s lofty 8-10x targets that a few transactions have traded at.  The public markets are unlikely to be particularly excited about investing in this space – as many public DSO’s found out in the late 1990’s when a number of public entities in this market were unable to maintain acceptable same-store growth trends and ended up being taken private in the early rounds of private equity transactions. 


So ends our cautionary tale!


By Kurt Andersen, Managing Director


The Readiness Profile:

Are you Ready to Sell?


A balanced and healthy ego can be a very good thing, especially if you are a business owner and have had to face enormous obstacles trying to grow your business over the years. Now imagine yourself sometime in the future ready to hand your “baby” over to a new owner and all you have to do is sign and execute the transfer of the stock or assets of your business. Tomorrow this business will no longer be your primary responsibility. Can you let go and feel validation for your ultimate success or will you feel guilty and a sense of loss and abandonment? How’s your ego holding up?


Perhaps the following list of questions can be useful in terms of thinking about timing your exit strategy and help you envision your “readiness profile” as a seller, whether to a financial buyer or a strategic buyer.


1) Are you irreplaceable? Not unless you are the only one that has the formula for the “secret sauce” and no one else can replicate the formula. As investment bankers, one of the first questions prospective buyers ask about a business we are representing for sale is “How strong is the management team”? Even if we are showing a deal to the rare strategic buyer who does not intend to keep the majority of the employees on for an extended period of time, they still want to know who is qualified to run the business as usual.


2) If you sell to a financial or strategic buyer who wants to grow the business faster using their capital, have you committed to a well thought out plan to make that growth happen? Are you prepared to work for a Board and report to that Board? Have you discussed the changes that such a transaction means with your spouse and your management team? Does the “second stage” restart of your business energize you?


3) If you sell to a strategic buyer, can you walk away and not wonder what the future would have been with you still in charge? Will you miss the control and the power, but not the stress?

4) What do your employees stand to gain or lose from your departure? Autonomy, freedom to grow…or their jobs, their security? What do your suppliers and or customers stand to gain from the sale?


5) What concerns do you have about the future of the business, with or without you?


6) Can you cope if you stay on for a second payday and are not in charge?


7) What do your close advisors think about the sale? Will anyone be threatened? Be careful of the subconscious bias that longtime accountants, attorneys and others may have.


8) Have you really thought about how you will spend the time and money you now have at your disposal?


9) Last but not least, will you have seller’s remorse? Probably not if you are honest with yourself about your desired outcome for yourself and your employees.


Maegan Evans, Ph.D.

Managing Director

The 2 Most Important Drivers Of  Your Company’s Valuation:

Open up any corporate finance textbook and you’ll find thousands of pages devoted to valuation theory, valuation principles, and techniques for arriving at a rational and dispassionate value for your company.
No matter how sound the valuation theories are, companies are valued in the real world, by real people with varied motives, amidst a dynamic market and uncertain future that no one can perfectly predict.  And so entrepreneurs must focus on driving their company’s valuation by building the best business they can build, engaging with real-world investors and potential buyers, and painting a picture of their company’s future that is both expansive and credible.

By the time you’ve decided to actively sell your business or raise a round of financing, you’ve got to put building the business on hold and devote your attention fully to the capital raising process.  At this point in time, the two most important drivers of your company’s valuation will be:
1. It’s future
2. Competition among investors
Let’s address these one by one.
The Future
Investors only care about the future of your company. 
When an investor studies your company’s historical track record, reviews your financials, or interviews your customers, they are doing it to look for clues about the
future prospects of your company.  The quality and credibility of the picture you paint of your company’s future – the size of your market opportunity, the speed and predictability with which you can serve your customer base, and the defensibility of your product offering – is the most important driver of your company’s value.
In an uncertain world, the more predictable and sustainable your company’s future profits are, the more valuable it becomes to investors, who constantly assess the risks and rewards of an investment opportunity.
Many entrepreneurs get mired in the details of valuation or put their head in the sand and simply pick a number based on their personal needs or what they heard was “right for their industry”.  This is wasted time.
Competition Among Buyers
A credible and compelling future makes it easier to attract investors.  And if you’re raising money or selling your company, competition is a must-have. 
You will not dependably realize a fair value (let alone maximize your offer) for your business without multiple uniquely interested and credible parties at the table.
It doesn’t matter if your business has been growing at 100% top-line with 50% EBIT margins for 10 years straight – if you only have one interested party at the table, you have created no competition for your business and will struggle to achieve a fair outcome.  For entrepreneurs more familiar with selling to customers than with raising capital or selling their company, think about your sales process: the richer your pipeline of customer prospects is, the more choosy you can be about which prospects you focus on closing, and the more disciplined you can be in negotiating the pricing and terms of the customer contract.  The exact same concept applies to raising money or selling your company.
Creating competition in a financing or exit process is one of the most important reasons the investment banking profession exists – similar to a good real estate agent, a great investment banker helps business owners drive to a fair outcome by attracting multiple, interested parties that are acutely and uniquely motivated to buy or finance your business.
As you prepare to raise money or sell your company, ignore all of the noisy free advice you’ll get and focus on two things: how to crisply and credibly articulate the future of your business in the most predictable and expansive way possible, and devote meaningful time to doing the necessary networking and relationship development (meeting with investors before you formally initiate a process, meeting investment bankers who can help you) in advance so you can attract a set of uniquely and acutely interested partners to the table.
By Axial CEO, Peter Lehrman

FRG People Highlights

We are pleased to welcome new additions to our team!

A.J. Krause recently joined Falls River Group in a Business Development capacity. Most recently, A.J. was the CEO of a company he created to better connect advisors for business purposes. The mixture of in-person and online interaction attracted much positive feedback and created many new business opportunities for its members. Prior to this, A.J. was in the life insurance industry with a member firm of M Financial. Previously, he served as Head Trader and helped to grow

Michael Ross joined Falls River Group as an analyst in June 2015 after graduating from Florida State University where he earned Bachelor of Science degrees in both finance and business management. During his time at FSU, he founded a profitable cell phone recycling business before focusing on his career in financial services. Michael started out as an intern at MWM Investment Consulting in the summer of 2013, concentrating on wealth management. Most recently, he served as a summer associate in New York City for private equity broker PEX Global where he was responsible for the research of a wide array of private investments.

The IMAP Board

of Directors

From left: Scott Eisenberg – USA, Sergio Milic – Chile, Jurgis Oniunas – Croatia, Jurg Kurmann – Austria, Kerry Dustin – USA, Gilberto Escobedo – Mexico, Eduardo Morcillo – China, Steve Dresner – USA, Francisco Gomez – Spain, Michael Reeves – UK




Falls River Group, LLC, a Global Merger and Acquisition Advisory Firm based in Naples, Florida, and a member of IMAP, an exclusive global partnership of leading M&A firms providing M&A services focused on the middle market.  IMAP celebrates over 40 years of successful global collaboration with consistent ranking among the top M&A advisories throughout the world.  From more than 35 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 more information, visit: and


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