Relationships. Commitment. Results.

icon Careers

Category: Closely Held Businesses Services

Future Trends in Manufacturing


October 19, 2021

Ted MotheralOctober 19, 2021

With M&A activity in the manufacturing sector at a historic high in the first half of 2021, it’s important to look at some of the current and future worldwide trends in this industry that are driving activity and growth and affecting the M&A market.

An aging workforce fosters M&A as a major growth tactic.  Family-owned manufacturing companies are facing challenges as succession planning is complicated by an aging workforce.  The baby-boomer generation, especially for lower middle market and middle market manufacturing companies, is finding it increasingly more difficult to succession plan for their companies when they don’t have a family member to take over. Skilled labor and the younger generation’s interest in the manufacturing industry is waning. This is causing two major trends – one is the realization that aging business owners need to contemplate an exit of their business altogether, and the other is, for those owners who do not want to exit, they are looking to acquire companies in order to get the skilled labor that they need to continue to grow their company.  Both trends have caused record M&A growth in the manufacturing industry, and we expect these trends to continue as the baby-boomer generation steps into retirement, and the world steps out of the economic uncertainty of the COVID-19 pandemic.

Shifting from B2B to B2C.  In recent years, many manufacturers have opted to transition from a traditional business-to-business (B2B) model to a business-to-consumer (B2C) model. The B2C model boasts a number of appealing benefits, including increased profits (companies can get the MSRP as opposed to the wholesale prices for their products), faster time to market, brand control, price control, and better customer data. To effectively move from B2B to B2C, more and more manufacturing companies are improving and implementing e-commerce operations in order to deliver on fulfillment and tracking, secure payments, customer service management, and sales/marketing activity while creating a full look at all customer interactions. All in all, this shift from B2B to B2C enhances the modeling of the business as a whole, which creates a better, more attractive M&A candidate.

Big Data and the Internet of Things (IoT).  A renewed interest in the Internet of Things (IoT) and an increased emphasis on predictive maintenance means big data is an even bigger trend than ever before. IoT, which entails the interconnection of unique devices within an existing internet infrastructure, has enabled manufacturers to make informed, strategic decisions using real-time data and achieve a wide variety of goals, including cost reduction, enhanced efficiency, improved safety, product innovation, and more. The ability to collect data from a multiplicity of sources, combined with increasingly powerful cloud computing capabilities, make it possible for manufacturers to slice and dice data in ways that provide them with a comprehensive understanding of their business — an absolute essential as they work to reevaluate their forecasting and planning models and develop a successful COVID-19 exit strategy. From a M&A perspective, this will create more accurate valuations if these manufacturing companies go to exit, and it will also emphasize the intellectual property nuances of any sale of these manufacturing companies.

Ted Motheral is Chair of the Walter | Haverfield Business Services Group who focuses his practice on corporate transactions, mergers and acquisitions, private debt and equity financing. He can be reached at 216-928-2967 or at tmotheral@walterhav.com.

*This article also appears in Crain’s Cleveland Business.

Walter | Haverfield Tax Partner Updates Tax Book for Family Businesses


August 13, 2019

Gary Zwick

First published in 1999, an updated and re-published version of “Tax and Financial Planning for the Closely Held Family Business” is now available for preorder. Gary Zwick, a partner and CPA with Walter | Haverfield’s Tax and Wealth Management group, wrote and updated the book with James John Jurinski. Jurinski is an attorney and CPA as well as professor of accounting and law at the University of Portland’s Pamplin School of Business.

“Tax and Financial Planning for the Closely Held Family Business,” published by Edward Elgar Publishing, offers non-traditional techniques to help business advisors craft strategies for their clients. It also offers solutions to family businesses and their owners.

“This type of work requires the ability to nimbly apply not only legal, business and tax law principles, but also requires the advisor to be able to understand nuances of how families work in the context of the family business,” said Ronald Levitt, an Alabama-based attorney who focuses on business and tax planning issues for closely held businesses. “Zwick and Jurinski have found a way to pull all of those issues and nuances together in a book that clearly lays out the issues and problems that advisors face in representing family businesses.”

In the book, Zwick and Jurinski rely on their extensive experience in guiding family businesses through a maze of organizational, tax, financial, governance, estate planning and personal family issues.

Zwick and Jurinski also co-authored the book, “Transferring Interests in the Closely Held Family Business,” published in 2002 by ALI-ABA. This book is in the process of being updated and re-published by Edward Elgar Publishing.

Additionally, Zwick has written more than a dozen feature articles for major tax publications. He also wrote the chapter titled, “Property Received in Exchange for Services – Section 83” for the Lexis Nexis Online Encyclopedia. For many years, Zwick was the Tax Clinic editor of the August rotation in the Tax Adviser, the AICPA’s national tax publication. He is also a contributor to the ALI-ABA Practice Checklist Manual on Advising Business Clients II and the book, “Golden Opportunities,” by Amy and Armond Budish.

Zwick is a frequent speaker, both locally and nationally, to tax professionals on a variety of related topics. He is board certified in federal tax by the Ohio State Bar Association and former Chair of the Federal Tax Specialty Board of the Ohio State Bar Association. He continues to serve on the Federal Tax Specialty Board of the Ohio Bar Association. He was an adjunct professor of Wealth Transfer Tax and Estate Planning at Case Western Reserve School of Law and an adjunct professor of Tax Law and Wealth Transfer Tax at Cleveland State University College of Law.

To preorder “Tax and Financial Planning for the Closely Held Family Business,” click here.

Tail-end funds can damage a portfolio


April 22, 2017

In an article in Crain’s Cleveland Business, published on April 22, 2017 and titled, “Tail-end funds can damage a portfolio,” T. Ted Motheral provided advice to investors on how to handle tail-end funds, in order to reduce the negative impacts they may have on a manager’s or investor’s portfolio.

Company Succession Planning 101: Address basic questions before selling closely held business


January 18, 2017

As seen in Crain’s Cleveland Business on January 14, 2017.

Closely held business owners know they someday need a succession plan, but most are focused on day-to-day operations and delay addressing the transition process. Company and family dynamics are unique to each situation, so there is no one-size-fits-all solution. Often, the hardest part is knowing where to start. The simplest way is to ask three critical, interrelated questions.

1. Who is involved?

Identify all existing stakeholders. Address which trusted stakeholders can continue operations. Those given management responsibility do not need to be the same people who take ownership.

Then identify (a) what additional training is needed to allow designated successors to run the business; (b) how to compensate successors to keep them incentivized; (c) what is needed to keep management personnel from being removed if they don’t control equity; and (d) a backup plan should preferred management exit the business.

If no one from the next generation can successfully take over, owners must search for outside talent or begin strategic planning required to prepare for a company sale to an unrelated buyer.

2. When to transition?

Most family owned business owners have identified a date (or age) when they want to walk away from day-to-day operations. Ask if current owners desire to remain involved in critical decisions going forward or if they want to exit without looking back.

Tax and estate planning may be required to ensure ownership transfer is completed in the most efficient manner. Consider if it is advantageous to transfer equity over time or implement a recapitalization to separate voting and economic interests.

Certain deferred compensation plans and insurance products are most useful when implemented in advance of retirement.andnbsp; Your transition structure will drive these transfer dates.

3. How to implement the plan?

Economics drives most succession plans. Do current owners plan to give the company away, or do they desire a buyout? Do the proposed future owners agree to assume financial responsibility and ensure their elders get paid?

Knowing exactly who expects to be paid and in what amounts allows planning to maximize payout and minimize taxes. The succession proposal should be communicated to all parties before drafting documents.

Once there is sufficient consensus from all participants, the formal succession plan should be created through corporate agreements and estate documentation.

Experienced financial, accounting and legal counsel can provide options and identify areas of concern. A good succession plan will eliminate lingering uncertainties and ensure your company’s long-term future.

Jacob Derenthal is a partner in the Corporate Transactions Group of Cleveland-based Walter | Haverfield LLP.