Crain's Cleveland Business by Crain's Cleveland Business

Look Back: Playhouse Square took a team to create a Cleveland treasure. PAGE 19

AKRON

Uniontown manufacturer Kovatch Castings embraces ESOP to preserve the company’s culture and family legacy. PAGE 17

CRAINSCLEVELAND.COM I JANUARY 27, 2020

REAL ESTATE

Wave of NEO leasing may be growing for Amazon

GAME ON

SPORTS BUSINESS

Online retailer setting sights on more spots BY STAN BULLARD

Online retailer Amazon, as part of its drive to cement a hold on the last mile of home delivery, may be about to work another round of magic in Northeast Ohio’s industrial property landscape. Amazon is looking at leasing a total of more than 700,000 square feet of recently completed, 40-foot-ceilinged warehouse space in Northeast Ohio, according to three sourc-

“DON’T LOOK FOR WELL-LOCATED NEW (INDUSTRIAL) BUILDINGS TO BE CELEBRATING THEIR FIRST BIRTHDAY EMPTY.”

The Akron Vulcans’ home opener drew a crowd of about 800 at Goodyear Hall on Jan. 19. | JERRY JIVIDEN

Orf’s latest step in futsal push is launch of semipro team in Akron BY KEVIN KLEPS

A couple hours before the Akron Vulcans’ home opener on Jan. 19 at Goodyear Hall, Otto Orf was coaching youth futsal at a local high school. Orf’s teams were competing in the U.S. Youth Futsal Great Lakes Regional Championships, a massive tournament with a total of 354 games that drew teams from seven states and some clubs from Canada. The schedule might not have been ideal for Orf, a former indoor soccer star who is coaching and heading up

the operations of the Vulcans, a first-year member of the semipro National Futsal Premier League. But the symmetry between the youth teams and the Vulcans, though hectic, was perfect because of the future he has plotted out for futsal in Northeast Ohio. Orf Orf, who was a standout goalkeeper on Cleveland Crunch teams that won three National Professional Soccer League championships in the 1990s, has been trying to

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bring professional futsal to the region for years. The 56-year-old is a huge fan of the sport, which is basically indoor soccer played without walls and with a smaller ball, because of its frenetic pace and the way it emphasizes critical soccer skills. Orf and Cleveland attorney Nick CiCello, who was the backup goalie to Orf on the Crunch team that captured the 1999 NPSL crown, initially looked into the Professional

Futsal League, which is backed by Dallas Mavericks owner Mark Cuban. That league, which has yet to get off the ground (well past its original start date of 2018), wasn’t deemed to be a match, said DiCello, a partner at Spangenberg Shibley & Liber LLP. The 10-team National Futsal Premier League is a fit, Orf and DiCello believe, because it’s centered in the Midwest and its clubs are focused on grooming talent at the youth level. See VULCANS on Page 18

es familiar with the situation. The sources asked not to be identified because they are not authorized to discuss individual buildings, and Amazon typically requires people working on fulfilling its real estate needs to sign nondisclosure agreements. The upshot is that within a year, Amazon may be operating at 10801 Madison Ave., the nearly 170,000square-foot building that Weston Inc. of Warrensville Heights completed last year in Cleveland; at what’s now a 130,000-square-foot building in Bedford Heights planned by Indianapolis-based Scannell Properties at 24700 Miles Road; and even the 400,000-square-foot building finished last year by Chicago-based Westminster Capital at 43000 Victory Parkway in Glenwillow Village. “Don’t look for well-located new (industrial) buildings to be celebrating their first birthday empty,” one of the sources said. See AMAZON on Page 19

FOCUS | MERGERS AND ACQUISITIONS

 Northeast Ohio’s biggest mergers and acquisitions of 2019. PAGE 12 Overdoing due diligence up front can get in the way of an acquisition. PAGE 14 Remember to address risks during divestiture. PAGE 15

1/24/2020 2:14:20 PM

REAL ESTATE

Brecksville, DiGeronimo fine-tune big development plan

100-acre site of former Veterans Administration hospital could be future home of a major business BBY STAN BULLARD

Pending changes to the zoning of Valor Acres, the joint city of Brecksville and DiGeronimo Cos. redevelopment of the former site of the Veterans Administration hospital at Miller and Brecksville roads, add intriguing possibilities to the proposed project. Planning documents and presentations for the 100-acre site laboriously prepared by the suburb’s City Council and Planning Commission over the last several years are getting beefedup clarity to allow office and research as potential main uses of the site in addition to the manufacturing-distribution zoning already in place. The existing zoning has been used to shape what was expected to be a combination of retail, residential and office uses in the plan. The existing ordinance mentions medical laboratories for the manufacturing-distribution zoning, but no other research. The switch is eye-opening in light of the announced search by Sherwin-Williams Co. to find locations to replace its current headquarters and research center in downtown Cleve-

All that remains of the Veterans Administration hospital in Brecksville is the facility’s large yellow-brick smokestack. | DAVID KORDALSKI/CRAIN’S CLEVELAND BUSINESS

land that it said would consider alternative site options in downtown Cleveland, the region and several other states. Since saying it had launched a transparent search Sept. 12, the paint and coatings giant has not updated its plans. Brecksville Mayor Jerry Hruby in an email said he is in discussions with “several companies” for possible in-

vestments in the suburb 13 miles south of downtown Cleveland, but that Sherwin-Williams is not among them. Asked if he was in talks with representatives of Sherwin-Williams or others working on its behalf in that site-selection process, Hruby wrote in a follow-up email, “If you can not accept my previous answer, I am sorry.” Other developments in the suburb

signal the site is being positioned for a big business of scale as well as the potential development of a mixed-use complex. The suburb dates from 1811 and is home to an outsized, for a community of 13,000 residents, number of office, research and industrial operations clustered near the Miller Road-I-77 interchange and Brecksville Road. Last year, Brecksville City Council met April 2 with attorneys from Squire Patton Boggs to discuss the mechanics and legalities of tax increment financing (TIF), which allows property taxes to be used for a time for expenses associated with building projects such as roads and utilities instead of the city, schools and other property tax recipients. A TIF measure is likely a part of a Sherwin-Williams or other big project and would probably be used for a mixed-use project because they require substantial investments in access roads, green space and other factors. However, no TIF measure has been submitted, according to online Brecksville City Council records. Although council minutes indicate a TIF measure might be considered last September, none was introduced. Hruby also said no TIF measure has been acted on or is pending. The city has also had a residents committee reviewing options for the proposed Valor Acres project and conducting a community survey. According to the report posted online for a discussion last Nov. 6, one question asked if the city should offer incentives to attract office jobs. Another asked if it should offer workforce training. And another asked if the city should focus on manufacturing and industrial jobs. All three questions

received a total of more than 50% responses in favor of such items. The queries indicate the suburb’s leadership is sounding out the citizenry on whether Brecksville should up the ante with incentives to land big, job-rich projects where in the past it has relied primarily on its location for such commercial developments. The suburb received title to the VA hospital site from the federal government to shape its future development. The 50-year-old, 999-bed hospital closed in 2011 because its operations were consolidated with the VA hospital at University Circle. The city subsequently formed a joint venture with DiGeronimo Cos., a demolition, construction and real estate firm in Independence, to develop the site. DiGeronimo has been taking an increasing stake in real estate projects over the past five years, including a partnership with Fairmount Properties of Cleveland to create the award-winning Pinecrest mixed-use project in Orange Village. The origin of DiGeronimo as a site excavation contractor serves its real estate ambitions as well. For example, at the VA site, it has cleared old hospital buildings from the grounds. Aside from construction trailers, the only structure still visible from adjoining Miller and Brecksville roads is a tall chimney that once served the complex’s heating system. Abbas Hasan, DiGeronimo director of development, did not return two calls by 11 a.m. Friday, Jan. 24, to discuss the pending zoning measures and Valor Acres. Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter

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‘Nuclear’ jury verdicts are contributing to large premium spikes BY KIM PALMER

Businesses across the board are paying more in insurance premiums. One of the main drivers is an increase in the size of jury verdict awards that are overwhelming the commercial auto industry. The “nuclear jury verdict” (a verdict of $10 million or more) phenomenon is having ramifications for all commercial insurance. Fortune 500 companies reported 50% or higher premium hikes last year, and small to midmarket companies experienced 10% to 25% year-to-year increases. Industries particularly hard hit, such as commercial trucking, saw rates jump 100% or even quadruple over the last three to five years. The commercial trucking (or carrier) industry is helping drive the overall rate hikes in commercial insurance, according to Chris Mikolay, vice president of national accounts for National Interstate Insurance. He added that over the past five years, trucking insurance liability has been the poorest-performing segment in the property and casualty insurance industry. “It is really exasperating,” Mikolay said. “There is a decoupling, it seems, of the advancements in technology helping vehicles become safer — front-end collision avoidance, lane departure, speed limiters — and what owners are paying in insurance because of a spike in total dollars spent to pay for insurance claims.”

In less than a decade, jury verdicts against the trucking industry have increased by more than 550%, with an average award going from $2.6 million in 2012 to more than $17 million in 2019. Verdict amounts that would have been considered rare or unusual several years ago are happening more frequently. “You’re starting to routinely see $25 million and $75 million verdicts. There was a $280 million verdict in Georgia last year,” Mikolay noted. He added that the issue is compounded by a recent trend of private equity and hedge funds investing in law firms that specialize in accident lawsuits against trucking companies — bankrolling attorneys and helping with litigation costs in expectation of profiting from a nuclear verdict. According to Eric Zalud, an attorney at Benesch Friedlander Coplan & Aronoff who specializes in litigation and transportation, the phenomenon of punitive damages exceeding compensatory damages arises from a profound shift in how accident cases are litigated. “These verdicts come about because of new tactics used by the plaintiffs where they vilify the entire company and then seek punitive damages,” Zalud said. “During the trial, the company’s entire history and safety record is used to expand far beyond what happened during the actual accident.”

Some carriers have been able to mitigate huge verdicts, Zalud pointed out, with training and safety technology to prevent accidents or by maintaining meticulous safety, inspection and driving records to be used as evidence at trial. Bill Strimbu, a third-generation trucking company owner, said technology advances have led to a slight drop in the number of crashes over the last couple of years, even as business grows and his employees are driving more miles. “It is phenomenal the role of technology. It helps to manage our fleet and to drive up our safety numbers,” said Strimbu, who has worked at Nick Strimbu Inc. in Brookfield Township since the early 1980s. “The number of our claims have declined tenfold, but the severity has increased, especially if it is a bad accident.” Trucking companies like Strimbu’s, which need to buy insurance in pools or segments, have faced paying higher premiums for lower coverage amounts or buying less insurance, which exposes the company to greater risk. As is, Strimbu said he gets insurance from a number of different providers. He has a $1 million federal minimum for a basic auto liability policy, with the first $100,000 paid out of pocket. He adds to that an extra $2 million to $5 million in coverage for an umbrella policy, cargo loss insurance at $100,000 with $25,000

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“THERE IS A DECOUPLING ... OF THE ADVANCEMENTS IN TECHNOLOGY ... AND WHAT OWNERS ARE PAYING IN INSURANCE BECAUSE OF A SPIKE IN TOTAL DOLLARS SPENT TO PAY FOR INSURANCE CLAIMS.” — Chris Mikolay, vice president of national accounts for National Interstate Insurance NATIONAL INTERSTATE INSURANCE

“THESE VERDICTS COME ABOUT BECAUSE OF NEW TACTICS USED BY THE PLAINTIFFS WHERE THEY VILIFY THE ENTIRE COMPANY AND THEN SEEK PUNITIVE DAMAGES.” — Eric Zalud, associate chair of litigation dept. and co-chair of transportation group at Benesch Friedlander Coplan & Aronoff LLP

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out of pocket, and another $5 million umbrella policy for his drivers. “We also have a fund on the side for out-of-pocket cost because we don’t want it to hit the profit-andloss statement,” he explained. “If you have a couple of accidents, the costs — it could bankrupt you if it is not structured properly.”

Strimbu’s company is dealing with two out-of-state lawsuits, but it has only seen a modest premium increase recently because of its emphasis on driver training and cameras that monitor both the driver and the road. “We were one of the pilot programs that National Interstate had 15 years ago, when accident event re-

corders first came out,” Strimbu said. “The ones we have today — and we have them in every truck — are monitored by a third party and the data is transmitted electronically within minutes after the incident happens.” Early on in the program, cameras caught one of Strimbu’s drivers reading The Wall Street Journal while driving the Dan Ryan Expressway in Chicago. “That was the last day he worked for me,” Strimbu said. He added that if much more in the way of insurance costs are piled onto the trucking industry, which saw a slowdown from an epic year in 2018, he thinks profit margins will be squeezed enough that those costs will be felt by consumers. The higher costs could also be compounded by a wave of global firms walking away from insuring the trucking industry altogether. “We are seeing our publicly traded competitors now dealing with thinking they were charging enough premiums three years ago, but as the claims wash through, realizing they did not collect enough money and trying to figure out what to do,” Mikolay said. Zalud said that a confluence of tort reform, defense lawyers adapting to plaintiff tactics and further developments in safety could avert a rise in claims. However, it remains to be seen where the breaking point will be. “Currently, there is no tort reform to prevent a $50 million verdict,” he said. Kim Palmer: kpalmer@crain.com, (216) 771-5384

Gridiron Capital LLC Wins Private Equity Deal of the Year for 2019

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HEALTH CARE

Medical Mutual-Bravo relationship goes deep Acquisition of Bravo bolsters Medical Mutual’s goal of aiding, maintaining people’s well-being BY LYDIA COUTRÉ

Medical Mutual’s acquisition of Bravo, a Cleveland-based provider of employee wellness programs, began as a discussion for the wellness company to become a vendor for the health insurer. But the conversations quickly evolved into an opportunity for a much deeper relationship. An acquisition fit into Medical Mutual’s strategies around growth and population health and offered Bravo expertise and financial backing to help accelerate its growth. As of Jan. 1, Bravo is a wholly owned subsidiary of Medical Mutual. Terms of the deal were not disclosed. A few years ago, Medical Mutual’s leadership saw the health care landscape shifting toward population health, partnerships with providers and really moving away from episodic disease care to expanding a continuum of care for entire populations, said Dr. Tere Koenig, executive vice president and chief medical officer at Medical Mutual. “I think both providers and payers come together and realize it has to be about the care of the population and really about the care of the individual and how can we work together better to get those outcomes, communicat-

ing better, aligned goals for the patient,” she said. “We saw the market going that way with our partners, and we wanted to be leading the way.” Acquiring Bravo is a natural extension of that. Bravo fits into Medical Mutual’s goal of not just caring for sick patients but keeping people healthy and getting them healthier by engaging the whole spectrum of members and keeping them doing the right things for their well-being — work that is becoming critical for companies that wish to remain relevant and sustainable. “We have this great company, Bravo, right down the street, and they bring expertise in how to engage individuals in addressing and improving really common risk factors that we all deal with in life, and the behaviors,” Koenig said. “And when you look at things from a holistic view, a lot of these things we all deal with are the root causes of many chronic diseases such as diabetes and heart disease and stroke.” For Jim Pshock, founder and CEO of Bravo, Medical Mutual checked all the boxes: caring for the people on his team, caring about his customers, a fair offer and someone who is in it for the long haul rather than wanting to flip the company and make money quickly.

“WITH MEDICAL MUTUAL, I SAW A VERY WELL-RESPECTED, WELL-ESTABLISHED, WELL-FUNDED COMPANY THAT WANTED TO KEEP BRAVO AS AN INDEPENDENT, WHOLLY OWNED SUBSIDIARY BUT PROVIDE THE EXPERTISE AND THE FINANCIAL BACKING TO HELP US ACCELERATE OUR GROWTH INSTEAD OF OFFERING A WAY FOR INVESTORS TO MAKE MONEY BY CUTTING COSTS.” — Jim Pshock, founder and CEO of Bravo

“With Medical Mutual, I saw a very well-respected, well-established, well-funded company that wanted to keep Bravo as an independent, wholly owned subsidiary but provide the expertise and the financial backing to help us accelerate our growth instead of offering a way for investors to make money by cutting costs,” said Pshock, who will continue to lead Bravo and its 170 employees. Medical Mutual has more than 1.6 million members, making it one of the largest health insurers in the state. Growth through acquisition is a key part of Medical Mutual’s strategy, said Tom Dewey, executive vice president of people and strategy for the insurer. In 2018, Medical Mutual acquired Superior Dental Care, a dental benefits carrier headquartered in the Dayton area. “We’re going to continue to look at vendors as potential acquisition opportunities in the future,” Dewey said. “We’ll be strategic and opportunistic there when the opportunities come up.” Bravo has been “lean” and “conservative” in its growth in recent years. In 2018, Bravo’s revenue was about $31 million, up 15% from the prior year. Pshock said that held steady in 2019. A market saturated

with wellness solution providers has made it difficult to have adequate capital to focus on technology enhancements, marketing and advertising, he added. “The backing of Medical Mutual, frankly, allows us to take calculated risks without worrying that it’s going to make it harder to make payroll if one of those things doesn’t pay off,” Pshock said. “We’re immediately accelerating our technology roadmap. And we’re able to invest more into sales and marketing efforts because of the stability they bring us.” Today, Bravo has around 170 customers, which may each have thousands of employers. In total, it serves around 1.3 million eligible participants, which Pshock said he expects to more than double to 3 million this year — growth that is accelerated by Medical Mutual becoming a customer and providing the financial backing needed to scale. “We’re more secure, we’re more stable, we’re better funded, we’re more scalable and Medical Mutual as a flagship is not just an owner, they’re a flagship customer that will serve as a great reference for us,” Pshock said. Lydia Coutré: lcoutre@crain.com, (216) 771-5228, @LydiaCoutre

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6 | CRAIN’S CLEVELAND BUSINESS | JANUARY 27, 2020

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MANUFACTURING

PolyOne, Clariant deal seen as ‘holy grail’ Move combines Avon Lake firm with its largest masterbatch competitor BY FRANK ESPOSITO PLASTICS NEWS

PolyOne Corp.’s pending acquisition of the masterbatch concentrates business of Clariant AG is winning high praise from market watchers. Avon Lake-based PolyOne announced plans on Dec. 19 to acquire that global business for $1.45 billion. The agreement followed months of speculation between Muttenz, Switzerland-based Clariant and Saudi Arabian conglomerate Sabic. The PolyOne-Clariant deal is set for completion in the third quarter and values the Clariant business at about 11.1 times the annual earnings before interest, taxes, depreciation and amortization (EBITDA). On a Dec. 19 conference call, PolyOne chairman, president and CEO Robert Patterson described the acquisition as “a perfect match and one that aligns with the world’s megatrends.” He added that the deal is “truly transformational” for PolyOne and will make the firm a $4 billion business that will be “truly global.” In a recent research note, market analyst Kevin Hocevar of Northcoast Research in Cleveland said that “in our opinion, (Clariant’s masterbatch business) has always been the holy grail for PolyOne, as it combines the company with its largest color/additive competitor ... creating the un-

matched global leader in the space.” Hocevar added that his firm views the multiple that PolyOne will pay for the Clariant unit “quite favorably,” since it’s slightly less than the 11.9 multiple that PolyOne’s stock was trading at when the deal was an- Patterson nounced. PolyOne expects $20 million in run-rate synergies by the end of the first year after the acquisition and a total run rate of $60 million by the end of the third year. Hocevar said that it was a “game-changing acquisition for PolyOne.” Plastics M&A veteran Bill Ridenour said in an interview with Plastics News, a sister publication of Crain’s Cleveland Business, that the PolyOne-Clariant deal is the best acquisition that PolyOne has made since its 2000 formation from the merger of Geon Corp. and M.A. Hanna Co. “This acquisition makes PolyOne the overwhelming leader in specialty masterbatches in the world,” he said. “No one can touch them.” PolyOne in part is funding the deal with proceeds from the $775 million allcash sale of its Performance Products and Solutions business. That business was sold in August to private equity firm SK Capital Partners of New York. PP&S included a major PVC compounding business and had annual sales of

around $700 million. Ridenour, president of Polymer Transaction Advisors in Foxfire, N.C., said that PVC “had been a detractor” for PolyOne, whereas the Clariant unit “will be an enhancer with long-term value.” The PolyOne-Clariant deal includes the sale of Clariant’s global masterbatches business, with $1.1 billion in annual sales, and a separate agreement to sell the masterbatches business in India for $60 million. Major markets served by the Clariant business include consumer, packaging and health care. With the Clariant operations, PolyOne will add 46 manufacturing sites and technology centers in 29 countries and about 3,600 employees. They will be added to PolyOne’s Color, Additives and Inks segment. Ridenour said it’s not likely that many of those sites will be closed, since customers value fast service and availability. Patterson said PolyOne will continue to seek additional acquisitions in its composites operations. Company officials declined to comment further on the Clariant deal until it closes. Wall Street reaction has been positive, sending PolyOne’s per-share stock price up almost 11% to just under $36 on the day the deal was announced. The share price closed at $35.69 on Jan. 22.

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$43.6 billion deal easily beats record set by Marathon Petroleum BY CHUCK SODER

Here’s a record that didn’t last very long. When Findlay-based Marathon Petroleum acquired Andeavor of San Antonio for $35.5 billion back in 2018, it by far ranked as the biggest deal to ever land on our Largest Ohio Mergers and Acquisitions list since we first published it in 2014. Then, last year, Fidelity National Information Services of Jacksonville, Fla., plunked down $43.6 billion worth of cash and stock to acquire Worldpay, a Cincinnati-area payment processing company. Kaboom. That record-shattering deal made for a very lopsided list. The full digital list, built with data from S&P Global Market Intelligence, contains 50 deals in which the acquired asset or one of the buyers or sellers is based in Ohio. Those 50 deals were worth a total of $96.9 billion, just short of the $98.5 billion from last year’s list, but well ahead of totals from previous lists. But the Worldpay deal accounts for 45% of this year’s total. It’s nearly eight times bigger than the No. 2 deal on the list: Cincinnati-based Ethicon’s $5.75 billion purchase of Auris Health, a medical robotics company

More on mergers and acquisitions in Focus  Northeast Ohio’s biggest mergers and acquisitions of 2019. Page 12 Overdoing due diligence up front can get in the way of an acquisition. Page 14  Remember to address risks during divestiture. Page 15  Find the Largest Mergers and Acquisitions list on Page 16.

in Redwood City, Calif. (That purchase price, like others on the list, includes incentive payments that will be triggered only if certain milestones are met.) The biggest Northeast Ohio deal on the list is Parker Hannifin’s acquisition of North Carolina-based LORD Corp. — a deal that triggered several large donations, including a $261 million gift from the Lord Foundation of Ohio to the Cleveland Clinic,

the largest gift ever received by the hospital system. You can learn more about that acquisition and a few other big local deals on Page 12. One of the biggest software deals to ever occur in Northeast Ohio shows up at No. 14: Genstar Capital of San Francisco announced in August 2019 that it would acquire a majority stake in OEConnection, a Richfield company that makes software for auto dealers. At the time, the trade publication Buyouts reported the purchase price to be $1.3 billion, citing anonymous sources. The name that shows up the most on the list is Welltower. The Toledo-based health care real estate investor shows up six times in the buyer column and four times in the seller column on the full digital list, which is available to Crain’s Data Members. Another company that regularly appears on this list, MPLX LP, which is majority-owned by Marathon Petroleum, is back this year at No. 6. It acquired a newer Marathon affiliate, Andeavor Logistics, in a deal involving a stock exchange and the assumption of $5 billion in debt.

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JANUARY 27, 2020 | CRAIN’S CLEVELAND BUSINESS | 9

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PERSONAL VIEW

Super Bowl LIV: The game behind the game

RICH WILLIAMS FOR CRAIN’S CLEVELAND BUSINESS

BBY DICK MAGGIORE

EDITORIAL

Showtime

wo of our favorite cultural institutions — the Cleveland International Film Festival and Playhouse Square — are joining forces in one of those partnerships that makes you say, “Well, of course that makes sense.” CIFF announced last week that it will move, in 2021, to Playhouse Square, creating a forever home for the organization that its longtime host, the Cleveland Cinemas-run Tower City Cinemas, couldn’t offer because of uncertainty about the direction of the entire Tower City complex. Playhouse Square’s theaters were built for movies, and if you’ve attended a CIFF Opening Night gala there or another movie-related event, you know they’ll provide a beautiful, dramatic venue for the 100,000-plus people each year who attend the festival. As a permanent home for CIFF goes, this is as good as it gets. The move to Playhouse Square keeps CIFF downtown and strengthens an already lively arts district that will get more residential energy when the 34-story, 318-unit Lumen apartment tower is completed later this year. For Playhouse Square, CIFF provides another importAS A PERMANENT HOME FOR ant resident company include the CleveCIFF GOES, THIS IS AS GOOD (others land Play House, DANCECleveland and Great AS IT GETS. THE MOVE TO Theater) and bolPLAYHOUSE SQUARE KEEPS Lakes sters international programming. It potentially CIFF DOWNTOWN AND creates synergies by placSTRENGTHENS AN ALREADY ing the spring festival in even closer quarters with LIVELY ARTS DISTRICT. the growing Cleveland State University School of Film & Media Arts, which is in the Idea Center building and just landed $1 million in grants to expand its physical facilities and programming. The partnership is the result of a forward-thinking leadership from CIFF’s executive director, Marcie Goodman, and Playhouse Square president and CEO Gina Vernaci. It also stems from a lot of hard work by their teams. More of that will need to be done between the end of this year’s CIFF44 — the 30th at Tower City Cinemas, which certainly helped the event grow to what it is today — and the start of CIFF45 in April 2021

to maintain the smooth experience festivalgoers expect. This is a good development for the momentum of downtown. We’re looking for more of that soon, in the form of a Sherwin-Williams announcement of a new downtown headquarters tower and progress on the proposed City Block entrepreneurship center/park transformation of Tower City — a plan we hope can accommodate a refreshed movie theater as a key amenity that makes the city’s core more vibrant and livable.

At minimum R

aising the minimum wage is a touchy issue for business owners and a vital one for many workers. A proposal floated last week for a constitutional amendment that would gradually raise Ohio’s minimum wage might occupy a sweet spot between the two camps. It’s too early to take a position on the plan from Ohioans for Raising the Wage, a coalition of community and union leaders that is in the early stages of collecting more than 422,000 valid signatures of registered Ohio voters by July 1 to make the fall ballot. But the plan they’ve outlined strikes us as a reasonable, balanced approach to lifting the minimum wage in the state without causing intense disruption to business that threatens job creation. The state’s current minimum wage of $8.70 an hour ranks 28th among the states, The Columbus Dispatch reported, and is below the average state minimum wage of $11.80 an hour. As the Dispatch noted, the proposal as currently constituted “would increase the minimum wage to $9.60 an hour on Jan. 1, 2021, then boost it by 85 cents each year for four years to reach $13 an hour ($27,040 annually for a full-time worker) in 2025.” Future increases then would be tied to the rate of inflation. This is notable for what it isn’t: a hike to the much-discussed $15 per hour, done immediately or in a short time period. It would, though, represent a nearly 50% increase in the minimum wage over five years — enough to make a real difference for lowwage workers. There will be time to look at this more closely, if it makes the ballot. For now, though, we’re encouraged at the approach to bring Ohio more in line with other states.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com) Managing Editor: Scott Suttell (ssuttell@crain.com) Contact Crain’s: 216-522-1383 Read Crain’s online: crainscleveland.com

Will more brands brave the political fray in 2020? For many years, advertisers were cautioned not to mix brands with politics. Conventional wisdom said choosing sides was commercial suicide. The old calculus was: Why alienate half your audience? In the era of social discourse, however, the demand for companies to exercise social responsibility has intensified. Ten Maggiore is years ago, only about 6% of Super Bowl ads president and had social messages. Today, it’s about 25%. CEO of What should we expect this year? positioning ad Likely a repeat of last year. agency Innis Reflecting the #MeToo movement, we Maggiore, saw more brands feature women in Super founded in Bowl ads last year than at any time in his- Canton in 1974. tory. We also saw marquee brands flex gravitas for social gain: Budweiser touted its environmental credentials with Bob Dylan’s “Blowin’ in the Wind;” Microsoft promoted game controllers for children with disabilities; Toyota followed the journey of Paralympic gold medalist Lauren Woolstencroft; AB’s Stella Artois capitalized on The Dude from “The Big Lebowski” and Carrie Bradshaw from “Sex in the City” in support of Water.org; and SodaStream promoted the reduction of single-use plastic. Most of those advertisers are expected back this year SOCIAL CONSCIOUSNESS with similar intentions. IS THE NEW CURRENCY. The idea of brands filling a moral vacuum is not only MORE THAN HALF OF ideological, it’s economic. THE PEOPLE IN A Consider that today, the 10% of the people capturing 90% to RECENT NIELSEN 95% of the incremental income SURVEY SAID THEY “ARE gain are blue, code for Democrat. If your brand is like Nike, with WILLING TO PAY MORE 70% of customers under the age FOR PRODUCTS AND of 35, ethnically diverse, urban SERVICES PROVIDED BY and skewing progressive, aligning with progressive causes is the COMPANIES THAT ARE smart shareholder thing to do. COMMITTED TO Social consciousness is the new currency. More than half POSITIVE SOCIAL AND of the people in a recent Niel- ENVIRONMENTAL sen survey said they “are willing to pay more for products IMPACT.” and services provided by companies that are committed to positive social and environmental impact.” Another study found strong social responsibility creates a “reservoir of goodwill” that offers a shield against scandals. Any foray into the world of brand politics is tricky. Managing the tension between corporate responsibility and shareholder value isn’t easy. Starbucks took a licking when it went live with a campaign encouraging customers to engage its baristas in discussions about race. The campaign was nixed in six days and resulted in a 12% stock slump. Starbuck’s ultimately weathered the storm and rebounded to an all-time high. Dick’s Sporting Goods stopped selling assault rifles in 2018. The decision cost the company customers and employees. CEO Ed Stack says many who applauded the decision at the time seem to have forgotten, but those in opposition have not. “Love is fleeting,” Stack said. “But hate is forever.”

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes.

See MAGGIORE on Page 11

Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.

10 | CRAIN’S CLEVELAND BUSINESS | January 27, 2020

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OPINION

FOR SALE | KNIGHTS INN

THE STAKES ARE HIGH FOR BRANDS WILLING TO TAKE A STAND. THERE IS NO BETTER STAGE FOR GRAND GESTURES, WHETHER SOCIAL OR POLITICAL, THAN THE SUPER BOWL. THIS YEAR’S GAME IS EXPECTED TO ATTRACT 100 MILLION U.S. VIEWERS AND HUNDREDS OF MILLIONS OF VIEWS ON SOCIAL MEDIA.

MAGGIORE

From Page 10

Family-owned 84 Lumber’s debut in Super Bowl LIII, depicting a Mexican mother and daughter on a journey to find a better life in the U.S., inspired both praise and sharp criticism from viewers who recognized the political reference to President Donald Trump’s stance on immigration and his campaign promise to build a border wall between Mexico and the U.S. The lumber brand’s creative director said the ad was intended as “a recruitment tool to attract 20-somethings” in a tough labor market. The strategy was right, even if the execution was questionable. Research shows “purpose-driven employees” tend to remain with employers 20% longer and 47% are more likely to be engaged promoters of the companies for which they work. For all the good a brand can do in influencing a better society and world, there is a danger. Brand houses need to be in order or risk being called out for running sweatshops and employing child labor (Apple), trading privacy for profit (Facebook and Google) or engaging in pay discrimination practices and sexual

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harassment (Nike). Call it the Ricky Gervais effect. To avoid costly mistakes, brands must know their customers and their values. It’s also important for advertisers to be mindful of the environment that is the Super Bowl, sometimes called America’s unofficial national holiday (or party day). Deemed too serious, Nationwide’s “Boy” and 84 Lumber’s “The Journey” bombed badly in Super Bowl ad rating polls. Fifty-two percent of people report they Ad-Sandusky.indd 1-27-2020-SVN watch for the commercials, not the game. Advertisers may be wise to keep the cause serious, but the delivery uplifting or fun or both. The stakes are high for brands willing to take a stand. There is no better stage for grand gestures, whether social or political, than the Super Bowl. This year’s game is expected to attract 100 million U.S. viewers and hundreds of millions of views on social media. Whether more advertisers engage in issue-oriented, politically charged ads this year is anyone’s guess. Some predict that because of the national divide, advertisers will avoid controversial issues to play it safe. One thing is certain: With President Trump and candidate Michael Bloomberg airing 60-second spots during the game, escaping politics won’t be easy.

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JANUARY 27, 2020 | CRAIN’S CLEVELAND BUSINESS | 11

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MERGERS AND ACQUISITIONS

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BIG DEALS

A look at Northeast Ohio’s biggest mergers and acquisitions of 2019

T BY DOUGLAS J. GUTH

hree Northeast Ohio corporations closed 2019 with billion-dollar acquisition announcements set to strengthen their portfolios and propel substantial value for shareholders. In late October, Parker Hannifin Corp. (NYSE:PH) completed a $3.675 billion purchase of LORD Corp., a North Carolina-based producer of advanced adhesives and coatings as well as vibration- and motion-control technologies. According to a news release issued Oct. 29, the transaction “is expected to drive significant value for shareholders through increased organic growth, higher EBITDA margins, stronger cash flow, and add to Parker’s earnings per share, excluding one-time costs and deal-related amortization.” Additionally, the Mayfield Heights company said LORD will boost its portfolio “of attractive margin and high-growth businesses, and significantly expand Parker’s materials science capabilities with complementary products, better positioning Parker to serve customers in

12 | CRAIN’S CLEVELAND BUSINESS | JANUARY 27, 2020

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growth industries and capitalize on emerging trends such as electrification and lightweighting.” LORD, which makes $1.1 billion in annual sales through products used in the aerospace, automotive and industrial markets, is expected to join Parker’s Engineered Materials Group. LORD has 3,100 employees at 17 manufacturing and 15 research-and-development operations worldwide. Parker employees about 58,000 people globally, with revenues in 2018 topping $14.5 billion. In September 2019, the motion and control technologies giant also completed a $1.725 billion acquisition of Exotic Metals Forming Co., a manufacturer of air and exhaust management solutions for aircraft and engines. Parker spokesperson Aidan Gormley said the LORD and Exotic Metals deals follow a larger strategy of investing cash flow into high-growth, attractive margin businesses. “We are excited by the amount of collaboration and interaction between our teams

reinforcing the strong cultural match of our organizations,” Gormley said in an email. “Each integration team has been making excellent early progress towards realizing the synergies we previously outlined.” On Dec. 3, 2019, Cleveland-Cliffs Inc. (NYSE: CLF) and West Chester, Ohioheadquartered AK Steel Holding Co. (NYSE: AKS) announced a merger agreement that allows Cliffs to acquire all of AK’s issued and outstanding shares of common stock. The $1.1 billion stock swap is expected to generate $120 million in annual costs cuts within a year of the deal’s closing. Savings will derive chiefly from consolidating corporate functions, reducing duplicated overhead costs and energy cost savings. Company officials forecast the combined company will generate $8.2 billion in net revenue, $1.3 billion in earnings before income tax and free cash flow of $923 million. The transaction combines Cliffs, a Cleveland-based maker of iron ore pelILLUSTRATION BY IMAGEZOO VIA GETTY IMAGES

1/23/2020 10:22:47 AM

ADVISER If someone gave you a company, should you take it? Maybe, maybe not. PAGE 14

lets, with AK, a manufacturer of flatrolled carbon, stainless and electrical steel products. In announcing the deal, the companies said the merger will result in vertically integrated output of value-added iron ore and steel products. “Together, we expect to be able to take advantage of growth opportunities faster and more fully than either company could on its own,” said AK CEO Roger K. Newport in a December press release. The deal is subject to shareholder support as well as regulatory approvals and closing conditions. Upon its completion, Newport will retire as AK’s CEO, while three existing members of the company’s board will join the Cliffs board. AK will also become a direct subsidiary of Cliffs while retaining its branding and identity. Lourenco Goncalves, chairman, president and CEO of Cliffs, will lead the expanded organization, which will continue to be headquartered on Public Square in downtown Cleveland. Later in December, PolyOne Corp. (NYSE: POL), a global provider of specialized polymer materials and services, agreed to buy a color

and additive masterbatch business from Clariant AG of Switzerland for $1.45 billion. PolyOne said in a Jan. 20 email to Crain’s that the transaction is anticipated to close in mid2020, subject to the satisfaction of typical closing conditions and regulatory approvals.

“THIS IS A LANDMARK TRANSACTION FOR US, AND ONE THAT MARKS A SIGNIFICANT INFLECTION POINT IN OUR COMPANY’S HISTORY.” — PolyOne chairman, president and CEO Robert M. Patterson

In a Dec. 19 webcast regarding the agreement, PolyOne chairman, president and CEO Robert M. Patterson said, “This is a landmark transaction for us, and one that marks a significant inflection point in our company’s history. This acquisition drives next-level, specialty transformation as we accelerate growth with sustainable solutions.” Patterson added the agreement

will bolster both companies and create “a true specialty enterprise.” The new PolyOne, he said, “will be a $4 billion specialty-growth company with world-class innovation, technology and service. Over 85% of our adjusted EBITDA will be derived from specialty applications. We will be defined by market-beating performance, driven by the growth of our sustainable solutions portfolio, where both PolyOne and Clariant masterbatch excel at innovating to solve their customers’ most complex formulation challenges.” The Avon Lake company said in a Dec. 19 press release that Clariant’s color and additive masterbatch business, which had sales of $1.15 billion over the previous year, includes specialty technologies and services for “high-growth global end markets, such as consumer, packaging and health care.” The Clariant business includes 46 manufacturing operations and technology centers in 29 countries. Its 3,600 employees will join PolyOne’s Color, Additives and Inks segment.

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Financial Advisor 200 Public Square / Suite 2600 Cleveland, OH 44114 Michael Blaszak +1 216 523-3121 Senior Vice President Michael.Blaszak@morganstanley.com Financial Advisor https://advisor.morganstanley.com/the-doll-wealth-management-group 200 Public Square / Suite 2600 Michael Blaszak Cleveland, OH Vice 44114 Senior President +1 216 523-3121 Financial Advisor Michael.Blaszak@morganstanley.com 200 Public Square / Suite 2600 https://advisor.morganstanley.com/the-doll-wealth-management-group Cleveland, OH 44114 +1 216 523-3121 Michael.Blaszak@morganstanley.com https://advisor.morganstanley.com/the-doll-wealth-management-group

Michael Blaszak.

Contact Douglas J. Guth: clbfreelancer@crain.com

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PROMINENT LOCAL BUSINESS LEADERS WELCOME BACK TO CLEVELAND H. JEFFREY SCHWARTZ, BUSINESS RESTRUCTURING AND REORGANIZATION ATTORNEY "Jeffrey Schwartz helped me lead a multibillion-dollar bankrupt company into a very profitable NYSE-listed company. He wanted the company to thrive as much as I did and worked constantly and creatively to make it happen. In a situation like this, that level of commitment is a must." ~ Boake A. Sells, former Chairman and CEO, Revco, D.S., Inc.

"When the outlook was grim for our debt-ridden, publicly held healthcare company, we called on Jeffrey Schwartz for thoughtful and creative guidance. The result was a remarkably favorable recovery for all stakeholders. I am forever indebted to Jeffrey and glad he's back in Cleveland." ~ Jon H. Outcalt, Sr., former Chairman, NCS HealthCare, Inc.

“Jeffrey Schwartz was instrumental in helping me navigate a complex Chapter 11 bankruptcy case. His keen, savvy insight and counsel were invaluable to me while I was the Revco general counsel learning on the fly about Chapter 11 bankruptcy proceedings for the nation’s first failed major LBO. Jeff is a true trusted advisor and friend, and we are fortunate to have him back in Northeast Ohio.” ~ Jack A. Staph, former Senior Vice President, Secretary & General Counsel, Revco, D.S., Inc. “I have had the opportunity to collaborate with Jeffrey Schwartz in many challenging situations in the real estate, steel, and mass aviation services staffing industries. Invariably, his focus was on preserving and growing enterprise value. He has repeatedly demonstrated an uncanny ability to chart and flawlessly execute a critical path to achieve optimal—and in some cases remarkable—successes beyond reasonable expectations. I wholeheartedly and fraternally embrace his return to Cleveland.” ~ Mark D. Thompson, President & COO , Arhaus, LLC; Director, PTC Alliance Holdings Corp. and Investors Diversiﬁed Realty; former CEO, International Total Services, Inc.; former EVP and CFO, Lexford Residential Trust (Reorganized Cardinal Industries, Inc.)

H. Jeffrey Schwartz

Partner and Co-Chair Business Restructuring and Insolvency Practice Group Calfee, Halter & Griswold LLP jschwartz@calfee.com ‫ ׀‬216.622.8515 Cleveland ‫ ׀‬New York JANUARY 27, 2020 | CRAIN’S CLEVELAND BUSINESS | 13

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FOCUS | MERGERS AND ACQUISITIONS | ADVISER

Would you take a company if it was given to you?

BY ADAM SONNHALTER AND JACK MENCINI

BY K

If you’re looking to buy a company, sometimes it helps to ask one of those palate-cleansing questions. Too often, folks get in their own way and make excuse after excuse for why they can’t buy a company (e.g., I don’t have a big pile of cash sitting around). That’s when you should cut through all the clutter and ask, “Would I take the company if it was given to me?” As you might imagine, the typical response we get to this question is a combination of crickets followed by a sly smile and then, “What do you mean if the owner gave it to me?” Most people can’t wrap their heads around the idea that someone would actually give them a business. (We’ll come back to that in a minute.) The point of the exercise is to remove nearly every obstacle preventing you from truly considering whether or not you would like to own this particular company. Believe it or not, there are in fact companies you wouldn’t take even if the owner(s) gave it to you — maybe because the business has some environmental issues or pending lawsuits. One of the most common mistakes when looking to buy a company is spending too much time on due diligence up front. Think about what happens when you, as a potential buyer, spend all this time, effort and

Mencini (left) and Sonnhalter are partners in the business coaching firm Maximum Value Partners.

KEEP IN MIND THERE ARE TWO KEY COMPONENTS TO ANY DEAL: PRICE AND TERMS. ONE OF YOUR FIRST GOALS AS THE POTENTIAL BUYER IS TO FIGURE OUT WHICH IS MORE IMPORTANT TO THE SELLER.

money investigating the company and researching the markets. You have now become emotionally involved. And that’s not a good place to be when you’re looking to buy a company, because that emotional stake can cloud your judgment. Emotions are a big part of any transaction, especially for the seller of a business. In many cases, the business being sold is their baby. They birthed it, grew it, had ups and downs with it, and now they’re going to sell it. They are definitely emotionally involved. That’s an advantage for you as the potential buyer, unless you also get emotionally involved by spending a lot of time on due diligence and market research. We advise entrepreneurs to instead spend their time and efforts “turning over rocks” and making offers to purchase companies before spending too much time on due diligence. It starts with looking at all different types of companies, or, as we refer to it, turning over rocks. Some popular “rocks” to look under include online listings of businesses for sale, the business opportunities sections of local newspapers and magazines, and reaching out to people on your “Know, Like, Trust” list. Your KLT list should include folks who know business owners like CPAs, attorneys, business coaches and bankers (especially bankers in the workout group). Once you find a company that inter-

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14 | CRAIN’S CLEVELAND BUSINESS | JANUARY 27, 2020

ests you, it’s time to make an offer to buy the business. The trick to making an initial offer is to take everything at face value. Start by assuming that everything presented to you by the seller in their “package” is true and accurate and make the offer based on that information. One of the nice things about many deals is the seller will have an asking price. What you’re trying to figure out is if that asking price is reasonable based on what they’re presenting in the package. If so, then make an offer at or near their asking price. Again, this is assuming you would “take it if they gave it to you.” There are three things making an offer to buy a company will do for you:  Helps you figure out what’s more important to the seller: price or terms  Takes the deal off the market so you will be the only one performing due diligence on the business  Gets you into the habit of making offers and gets you over any emotional baggage when it comes to doing that (e.g., I don’t want to offend the seller) Keep in mind there are two key components to any deal: price and terms. For example, let’s say the seller wants $1 million for her company and she wants it all in cash at closing. The $1 million is the price and the cash at closing is the terms. One of your first goals as the potential buyer is to figure out which is more important to the seller. The offer letter helps to smoke that out.

So would someone actually “give” you a company? The short answer is yes, although it can take a lot of different forms. The most common is where the seller will finance most or all of the purchase (i.e., the seller plays the banker). This structure is very attractive for many sellers, as it allows them to exit the business while still collecting a monthly check. It’s also attractive for many buyers, as it minimizes cash out of their pocket up front and allows the business to finance the purchase. Not only have we done deals like this for ourselves, we have coached a lot of people through this process. One example involved a client who was turning over rocks for about 18 months before he found a business he liked, a staffing company. The owner in this case was selling due to the death of a spouse and wanted to move on from the business. Since the seller had proceeds from a life insurance policy on her spouse, she had the financial flexibility to be the bank in the deal. She wanted to get out sooner vs. later, so she essentially gave the company to our client, who paid her out of the cash flow of the business over the next three years. So if you’re looking to buy a company, don’t get in your own way by spending too much time on due diligence up front. Instead, spend your time turning over lots of rocks and making offers to buy the business.

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ADVISER

Divestitures create unique human capital challenges BBY KATE HUBBEN

While 2019 proved to be challenging for companies looking to complete transactions, deals are continuing to happen, including divestment of noncore assets. Successful dealmakers continue to look for ways to minimize the risks of value erosion and delay. Divestitures create their own type of human capital challenges, especially for the spinoffs into smaller entities that may be in uncharted waters of creating and managing their own health and welfare program. Many of our clients look to us to handle the due diligence for employee benefits during a divestiture and there are specific ways to avoid mistakes if this is in your sights for 2020. 1. Thou shalt not promise. Employees spend a lot of time asking management about their benefits when a divestiture is imminent. They want to know about cost, benefits and … yes, whether they will have to change doctors. These questions will arise well before the answers are available. It is critical to prepare a consistent message for employees based on what you can and can’t answer, and do not promise that “nothing is going to change.” Inevitably, some element of benefits will change and there is absolutely no way to determine costs until the new group is underwritten.

2. Understand carve-out company as a means to costs. Basing health and ease the transition for emwelfare program costs on ployees and tackle all the the current costs may be a other challenges for the starting point, but it's not spinoff before the followthe correct input for future ing plan year. This sounds spinoff entity financial great in theory; however, if planning. HR professiona company is paying for benefits for more than one als should always reach employer, it might be conout to the existing carrier Hubben is sidered a Multiple Employfor two purposes: first, to associate see if they are interested in director at Willis er Welfare Arrangement, or MEWA. The MEWA reretaining the group, since Towers Watson they already have claims in Cleveland. quires burdensome filings, data on the employees reporting and funding who will be employed by guidelines and trementhe spin off entity; and second, to dous oversight by government entisecure cost estimates on a carve- ties. In some cases, there is no way out or stand-alone basis. The insur- to avoid the MEWA, but make sure ance vendor to the parent company to discuss this with your consultant or “seller” can always have the right or ERISA attorney before you try to of first refusal to continue to work defer the benefit plan separation to with the spinoff company. Deal post-close. teams leading these divestitures can be reluctant to allow for con- 4. See the forest for the trees. The versations with outside parties most common reason why top talduring the process. It’s HR profes- ent leaves during a divestiture or sionals who will need to make the other type of transaction is not case with legal and deal teams money, but discomfort with the about the ability to discuss appro- culture. According to Willis Towers priately with vendors and get ap- Watson’s Global M&A Retention propriate cost estimates for their Study, the aggressive pursuit of competitors and dissatisfaction spinoff planning. with their new role or the strategic 3. Beware the MEWA. Some com- direction of the company also repanies involved in a divestiture will sult in the loss of top talent. Noretain the financial obligation of where does it say that you lose top health benefits for the newly formed talent because the deductible in-

COMPANIES NEED TO FOCUS ON THE VIABILITY OF THE NEW ORGANIZATION, AND CANNOT UNDERESTIMATE THE WORK INVOLVED IN ESTABLISHING STANDALONE EMPLOYEE BENEFITS. THIS IS NOT BUSINESS AS USUAL, AND TYPICALLY FALLS ON THE SHOULDERS OF PEOPLE WHO HAVE TO ENSURE DAILY OPERATION OF THE PARENT COMPANY DOES NOT FALTER.

creased on the new benefits plan. If top talent feels valued and communicated with, they can and often will adjust. It is imperative to put employee benefits in its proper perspective and not have internal strife around the creation of a plan. As mentioned above, employees will have detailed questions before you have answers. This doesn’t mean you can brush these questions aside, as they are incredibly personal for employees and their families. Careful change and communication plans should be developed to keep people informed throughout the process. Proactively addressing these risks during a divestiture is critical to ensure that an “unknown” today doesn’t become an “unpleasant surprise” tomorrow. Companies need to focus on the viability of the new organization, and cannot underestimate the work involved in establishing stand-alone employee benefits. This is not business as usual, and typically falls on the shoulders of people who have to ensure daily operation of the parent company does not falter. Outside expertise and support can be critical to managing the significant amount of work in accordance with the deal timelines, while creating the right employee experience throughout.

Crain’s Cleveland Business will honor eight individuals in their 80s or older who are still working tirelessly to advance Northeast Ohio and its residents. Do you know someone 80 or older who has seemingly tossed the word “retirement” from his or her vocabulary and continues to make an impact in Northeast Ohio’s business, civic and philanthropic circles?

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January 27, 2020 | CRAIN’S CLEVELAND BUSINESS | 15

THE LIST

Largest Ohio Mergers & Acquisitions Announced in 2019 Ranked by deal size

DEAL VALUE COMPANY/ASSET SOLD; (MILLIONS) LOCATION

BUYER; LOCATION

SELLER; LOCATION

DATE ANNOUNCED

DESCRIPTION OF COMPANY/ASSET SOLD

$43,590.6 Closed

Worldpay Inc. Symmes Township

Fidelity National Information Services Inc. Jacksonville, Fla.

March 18, 2019

Worldpay provides electronic payment processing services.

$5,750.0 Closed

Auris Health Inc. Redwood City, Calif.

Ethicon US LLC Cincinnati

Feb. 13, 2019

Auris Surgical Robotics develops robotics technology for diagnostic and therapeutic bronchoscopic procedures.

$4,400.0 Closed

Epsilon Data Management LLC Irving, Texas

Publicis Groupe Holdings B.V.; MMS USA Investments Inc. Amstelveen, Netherlands; Brooklyn, N.Y.

Alliance Data Systems Corp. Columbus

April 14, 2019

Epsilon Data Management provides marketing solutions that integrate data, creativity and technologies for advertisers.

$3,675.0 Closed

LORD Corp. Cary, N.C.

Parker-Hannifin Corp. Mayfield Heights

Jura LLC Los Gatos, Calif.

April 29, 2019

LORD Corp. manufactures adhesives, coatings, motion management devices, sensing technologies and other products.

$3,634.8 Announced

AK Steel Holding Corp. West Chester

Cleveland-Cliffs Inc. Cleveland

Various investors

Dec. 3, 2019

AK Steel produces flat-rolled carbon as well as stainless and electrical steel products in the United States and internationally.

$3,275.8 Closed

Andeavor Logistics LP Findlay

MPLX LP Findlay

Various investors

May 8, 2019

Andeavor Logistics operates as a diversified midstream company in the United States.

$2,657.1 Announced

Cincinnati Bell Inc. Cincinnati

Brookfield Infrastructure Partners L.P. Hamilton, Bermuda

Various investors

Dec. 23, 2019

Cincinnati Bell provides diversified telecommunications and technology services to residential and business customers.

$2,575.9 Closed

Multi-Color Corp. Cincinnati

WS Packaging Group Inc. Green Bay, Wisc.

Diamond Castle Holdings; Constantia Flexibles Holding New York City; Vienna, Austria

Feb. 25, 2019

Multi-Color Corp. manufactures label products in the United States and internationally.

$2,205.1 Closed

Milacron Holdings Corp. Cincinnati

Hillenbrand Inc. Batesville, Ind.

July 12, 2019

Milacron makes and services engineered and customized systems within the plastic technology and processing industry.

$1,850.0 Closed

Benchmark Senior Living portfolio United States

KKR & Co. Inc. New York, N.Y.

Welltower Inc. Toledo

July 31, 2019

The deal includes assisted living properties in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

$1,725.0 Closed

Exotic Metals Forming Company LLC Kent, Wash.

Parker-Hannifin Corp. Mayfield Heights

Various investors

July 29, 2019

Exotic Metals manufactures air- and exhaust-management products for aircraft and engines.

$1,500.0 Announced

Clariant's color and additive masterbatch business Switzerland

PolyOne Corp. Avon Lake

Clariant AG Muttenz, Switzerland

Dec. 18, 2019

The business manufactures color and additive concentrates and performance solutions for plastics.

$1,400.0 Announced

Cooper Lighting Solutions Peachtree City, Ga.

Signify N.V. (formerly Philips Lighting) Eindhoven, The Netherlands

Eaton Corp. Beachwood

Oct. 15, 2019

Cooper Lighting sells lighting products for the commercial, industrial, residential and municipal markets.

$1,300.0 (1) Closed

OEConnection LLC Richfield

Genstar Capital San Francisco

Providence Equity Partners Providence, R.I.

Aug. 1, 2019

OEConnection makes software that allows car and heavy truck dealers to sell original equipment parts to other dealers and repair shops.

$1,080.0 Closed

Infiltrator Water Technologies LLC Old Saybrook, Conn.

Advanced Drainage Systems Inc. Hilliard

Ontario Teachers' Pension Plan Board Toranto, Ontario

Aug. 1, 2019

Infiltrator Water Technologies manufactures various products for the onsite wastewater and water industry.

$920.0 Closed

TransDigm's Souriau-Sunbank Connection Technologies business Versailles, France

Eaton Corp. plc Beachwood

TransDigm Group Inc. Cleveland

Oct. 29, 2019

The business makes electrical interconnect products for harsh environments for customers in the aerospace, defense, industrial, energy and transport industries.

$851.7 Closed

Three credit card portfolios of Alliance Data Systems Corp. United States

Alliance Data Systems Corp. Columbus

Feb. 26, 2019

The asset consists of three credit card portfolios worth about $851.7 million.

$850.0 Announced

35 medical office buildings (85% stake) United States

Invesco Ltd. Atlanta

Welltower Inc. Toledo

Nov. 11, 2019

The buildings contain 2.6 million square feet of space; all are affiliated with health systems.

$787.0 Announced

29 medical office buildings United States

Welltower Inc. Toledo

Hammes Company LLC Brookfield, Wisc.

Nov. 11, 2019

The 29 facilities contain 1.5 million square feet of space located mainly in densely populated areas.

$785.5 Announced

Omnova Solutions Inc. Beachwood

Synthomer USA LLC Atlanta

Various investors

July 3, 2019

Omnova provides specialty solutions and performance materials for various commercial, industrial and residential end uses.

$775.0 Closed

GEON Performance Solutions Avon Lake

SK Capital Partners New York City

PolyOne Corp. Avon Lake

Aug. 19, 2019

GEON is a processor of a wide range of engineered polymers.

$740.0 Closed

Utica East Ohio Midstream LLC Dennison, Ohio

The Williams Companies Inc. Tulsa, Okla.

Momentum Midstream LLC Houston

March 18, 2019

Utica East Ohio Midstream LLC owns and operates gas pipelines.

$680.0 Announced

More than a thousand AT&T wireless towers United States

Peppertree Capital Management Inc. Chagrin Falls

AT&T Inc. Dallas

Oct. 25, 2019

The towers comprised the remainder of the domestic towers owned by AT&T, which has agreed to lease them back.

$615.1 Announced

Blue Impact group business United States

Legacy Acquisition Corp. Cincinnati

Blue Valor Ltd. Hong Kong

Aug. 23, 2019

The Blue Impact group consists of multiple advertising and marketing services companies.

$580.0 Closed

Eight television stations of Nexstar Media Group Inc. United States

Scripps Broadcasting Holdings LLC Cincinnati

Nexstar Media Group Inc. Irving, Texas

March 20, 2019

The stations are located in Phoenix; Miami; Salt Lake City; New York City; Grand Rapids, Mich.; and Norfolk and Richmond, Va.

$580.0 Closed

Kony Inc. Austin, Texas

Temenos AG Geneva, Switzerland

Diebold Nixdorf, other investors North Canton

Aug. 28, 2019

Kony provides software to the banking industry.

$540.0 Closed

Scout RFP Inc. San Francisco

Workday Inc. Pleasanton, Calif.

Various investors

Nov. 4, 2019

Scout RFP operates a cloud-based sourcing platform that automates the enterprise buying process for buyers and suppliers.

$535.0 Closed

TV and radio stations Columbus, Indianapolis

TEGNA Inc. Tysons, Va.

The Dispatch Broadcast Group Columbus

June 11, 2019

The deal included WBNS TV and radio stations in Columbus as well as WTHR and WALV-CD TV stations in Indianapolis.

$510.0 Closed

Automated Packaging Systems Inc. Streetsboro

Sealed Air Corp. Charlotte, N.C.

May 1, 2019

Automated Packaging Systems manufactures packaging machinery and bagging materials.

$492.0 Announced

Ferro Corp.'s tile coatings business Mayfield Heights

Pigments Spain Sl Spain

Ferro Corp. Mayfield Heights

Dec. 16, 2019

The business unit includes Ferro Corp.'s coatings production business for ceramic tiles.

$474.8 Announced

United Community Financial Corp. Youngstown

First Defiance Financial Corp. Defiance

Various investors

Sept. 9, 2019

United Community Financial Corp. operates as the holding company for Home Savings Bank.

$450.0 Announced

American Freight of Ohio Inc. Delaware, Ohio

Franchise Group Inc. Virginia Beach, Va.

The Jordan Co. L.P. New York City

Dec. 30, 2019

American Freight operates discount furniture retail stores.

$391.0 Closed

Hammes medical office portfolio United States

Welltower Inc. Toledo

Hammes Co. LLC Brookfield, Wisc.

Jan. 24, 2019

These 23 buildings consist of 979,000 square feet Class A medical outpatient properties in nine states.

$385.0 Announced

Assisted living/memory care portfolio of New Senior Investment Group United States

ReNew REIT LLC Toledo

New Senior Investment Group New York City

Nov. 1, 2019

The portfolio contains 28 buildings in 14 states.

RANK

RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM

Get all 50 deals and detailed transaction notes. Become a Data Member: CrainsCleveland.com/data

Source: S&P Global Market Intelligence (spglobal.com/marketintelligence) and Crain's research. The list excludes deals that were announced in 2018 but closed in 2019. Deal value includes earn outs and other payments occurring only when certain conditions are met. Crain's does not verify all information; there is no guarantee these listings are complete or accurate. Send feedback to Chuck Soder: csoder@crain.com. (1) Reported by trade publication Buyouts, citing anonymous sources. 16 | CRAINâ€™S CLEVELAND BUSINESS | January 27, 2020

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CRAIN’S CLEVELAND BUSINESS

S E P T E M B E R 3 - 9 , 2 018

PA G E 3 7

AKRON MANUFACTURING

Kovatch Castings embraces ESOP to preserve culture, legacy Employees now own 44-year-old Uniontown company that continues its steady growth BY JUDY STRINGER

When Doug Kovatch began to ponder retirement a few years back, he found himself in a position not uncommon among many of today’s leaders of family businesses. Kovatch, now 62, had been president at Kovatch Castings Inc., a Uniontown manufacturer started by his father in 1976, for more than 40 years. The second-generation owner was ready to step back, but didn’t have children in the company “to carry on after me.” “I had looked into the possibility of third-party sale, but one of my board of advisers suggested I consider an (Employee Stock Ownership Plan),” he said. “The more I learned about it, the more ESOP became sort of the clearest strategy to meet my goals.” After just eight months of organization and planning, Kovatch told his 205 employees on Dec. 6 that they are now the owners of KCI — at no cost to them. As part of the ESOP transition, Kovatch sold 100% of his metal casting business to a trust fund, which acquired debt to leverage the purchase. Employees were then gifted shares of the trust. Continuity, Kovatch said, was one of the biggest advantages of an ESOP over a third-party sale. “It allowed me to keep in place my managers, who share my vision for our future, keep the Kovatch name and hopefully have it continue for many more generations to come,” he said. There were other benefits. Kovatch

“(THE ESOP) ALLOWED ME TO KEEP IN PLACE MY MANAGERS, WHO SHARE MY VISION FOR OUR FUTURE, KEEP THE KOVATCH NAME AND HOPEFULLY HAVE IT CONTINUE FOR MANY MORE GENERATIONS TO COME.” — Doug Kovatch, Kovatch Castings Inc. CEO

can remain connected to the company — he has transitioned to CEO — for as long as he likes and ensure leadership retains some of its core legacy values, such as donating 10% of its pretax earnings to charities tackling poverty and hunger. In addition, establishing an ESOP was an ideal way to reward “our hard-working employees,” he said. Although Kovatch declined to disclose the financial terms of the transaction, he called the purchase price “very fair.” “Maybe not quite as much as a sell to a third party, but I am very satisfied and was actually a little surprised that we were able to hit the numbers that we did,” he said. Shawn Ely, Cleveland-based managing director of Lazear Capital Partners, which facilitated the ESOP transaction for KCI, said a widespread impression that ESOPs can’t generate “a market price” is the main misconception about these types of deals. Often, ESOP sellers see a pretty nice return, according to Ely, especially when weighed alongside some of the other perks, such as compensating loyal employees and preserving culture.

“Those (latter) considerations typically speak very strongly in a family-owned business environment where the second- or even third-generation owner’s children are not involved in the business and the notion of selling it off and not preserving that culture and the history and legacy of the family is disheartening,” he said. In some cases, company owners might also defer capital gains taxes by transitioning ownership to an ESOP rather than an outside buyer, which Ely said is another “compelling” advantage for private owners looking to liquidate. With his sale closed, Kovatch said he intends to spend more time away from the office. Tom Planz, formerly director of operations, has taken on the role of president of KCI and will lead day-today operations, but Kovatch said he’s not cutting the cord altogether. KCI managed much of its growth to date by financing capital expenses with cash flow. The company, which provides castings for metal parts used in aerospace, defense, medical equipment and fiberglass manufacturing, now carries a pretty heavy debt load — for the first time — following the employee buyout.

And Kovatch won’t see all of the profit from his sale until that debt is paid off “over the next five to six years, so I have a vested interest in making sure we are successful,” he said. But the CEO is confident KCI has the momentum. “We’ve had growth for the last five years in a row,” he said, “and I expect to continue that growth as long as economy stays rolling the way that it is.” The casting specialist was a $4 million, 40-employee company in 1991 when it moved from its original location on Home Avenue in Akron to a 40,000-square-foot plant in Uniontown. Today, the 200-person, $25 million enterprise occupies 65,000 square feet in three adjacent buildings. Roughly 25% of its annual revenue comes from a thriving, 12-year relationship with Knauf Insulation, which uses metal spinner wheels crafted at the Stark County plant for glass fiberization. “We have about 80% of market share for that customer,” Kovatch said. “It is probably $5 million to $6 million of business in these wheels

alone, which are shipped all over the world.” Meanwhile, the company is seeing new growth among its aerospace and defense buyers. One of its newest orders is a missile fin for Lockheed Martin Corp., the first time KCI has worked with the country’s largest defense contractor. “And that business is growing steadily and significantly. We expect to be doing at least $6 million with (Lockheed) over the course of the next two to three years just on these missile components,” Kovatch said. He anticipates rising customer orders will require adding another 15,000 square feet to the factory floor in the next two to three years. “Obviously, the company had to borrow a lot of money, and that is a different position for us to be in, but Lazear Capital laid out a reasonable plan and my management team agreed to it,” he said. “They feel that it is very doable.” Contact Judy Stringer: clbfreelancer@crain.comw

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JANUARY 27, 2020 | CRAIN’S CLEVELAND BUSINESS | 17

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VULCANS

From Page 1

In addition to Akron, the 2-yearold league has clubs in Columbus; Chicago; Joliet, Ill.; Indianapolis; Ann Arbor, Mich.; Grand Rapids, Mich.; Lansing, Mich.; and Southfield, Mich. Some players are compensated for their efforts, but many are not. “Everything but the big paycheck, we’ve been trying to do for them,” Orf said. The Vulcans coach said the players receive plenty of free gear, and local restaurants have been donating meals. DiCello, whose family operates Ohio State Waterproofing, and another Cleveland attorney, former law school classmate Michael DeJohn, own the Vulcans. A franchise fee was required to enter the NFPL, and there are annual league dues. Teams aren’t going to be raking in profits, but Orf and DiCello are incorporating things they learned during their days with the Crunch — one of which is that a league is only as strong as its weakest links.

“Back then, they didn’t realize that if the other teams and owners can’t survive, the league isn’t going to survive,” DiCello said. “We’re very conscientious of that. We want the league to rise up together.” The NFPL is following the international futsal model, which places the pro team at the top of the “pyramid” and has affiliated youth teams that can funnel talent to the parent club. The Vulcans, because of Orf, likely are as well-positioned as any club to use that system to their advantage.

Setting ‘the standard’ Orf is the director and owner of Heart & Sole Futsal Academy, a director for Great Lakes Futsal and an assistant coach on the U.S. Futsal National Team. That helps to give the Vulcans “working parts that all fit together,” said Orf, who represented the U.S. at the 1996 FIFA Futsal World Cup. The early version of the club is dominated by a group of players from Argentina — a connection that stems from Orf’s international futsal travels. In future years, as the talent pipeline continues to develop, the Vulcans plan to field players who will

PEOPLE ON THE MOVE

About Futsal ... What is it?: Futsal is indoor soccer that is played without walls and with a smaller, low-bounce ball. Format: Games are played on hard, basketball-sized courts with five players on each side. Official endorsement: Futsal has been FIFA’s official form of indoor soccer since the 1980s. On the move: The sport is played in 100-plus countries by more than 12 million players, according to U.S. Futsal.

have worked their way up from one of the local clubs. The Vulcans will play 13 games, all on Friday, Saturday or Sunday, in their inaugural season. The home opener against Columbus (a 4-1 victory that improved Akron’s record to 2-1) drew a crowd of about 800 at Goodyear Hall, a 20,000-square-foot gymnasium located in the East End development. Former Warrant guitarist Billy Morris performed the national anthem, T-shirts and mini-balls were thrown

into the stands, and players and fans chatted long after the game was over. Tickets range from $5 (in the nonprofits section) to $25 for VIP positions, with the majority of the seats set at $10. “Other teams are finding their way. We want to set the standard,” DiCello said. “We played indoor soccer professionally. We understand people need to be entertained when they come.” Orf, with his long hair and excellent play in goal, was one of the stars of a Crunch club that drew average crowds of 7,000 to 8,000 fans during its championship seasons. The 6-foot-2 former goalie remains a draw, DiCello noted. A reunion game, played in a futsal format, that celebrated the 25-year anniversary of the Crunch’s first championship produced a capacity crowd of 2,500 at Goodyear Hall in 2019. “Without Otto, none of this happens,” DiCello said. “I realized that early on.” Orf has worn almost every imaginable hat for the Vulcans — from coaching to marketing, recruiting, sales and travel coordinator. He said his group has received strong partnership support from the

likes of Car Parts Warehouse and Serpentini Chevrolet — funds that help to “offset these first-year costs.” Orf is also receiving plenty of assistance from a group that includes general manager Nick Miletti (also an assistant coach), assistant GM Jason Schindler, volunteer coordinator Shana Schweikart and promoters Matt Williams, Brian “Essince” Collins and David Brooks. On the night of the home opener, as Orf was rushing to get ready after arriving from the youth tournament, he said his nerves were soothed when he saw a group of 50-plus volunteers wearing yellow Vulcans shirts. “There were faces from Crunch games, faces from youth games,” he said. “It made me, for the lack of a better phrase, feel warm and fuzzy all over.” In the months and years ahead, Vulcans players will participate in futsal clinics and exhibitions, a throwback of sorts to the days of the Crunch and the Force. “One way or the other, the town is going to know about this game,” Orf said. Kevin Kleps: kkleps@crain.com, (216) 771-5256, @KevinKleps

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ACCOUNTING

INSURANCE

LAW

Meaden & Moore

Oswald Companies

Walter Haverfield LLP

Calfee, Halter & Griswold LLP

It is our pleasure to announce the promotion of Carlo Berlingieri to Vice President Principal. Mr. Berlingieri serves in the Assurance Services Group and has 20 years’ experience advising clients in a variety of industries including manufacturing, distribution and consumer products. He has been very involved with our Employee Benefits Practice where he has managed a number of key client relationships including a number of public companies plans.

We are pleased to announce Mark Beilein has joined Oswald Companies as an Employee Benefits Advisor. He specializes in working with clients to plan, consult and deploy strategic benefit plans. In his role, Mark will be responsible for new business development along with the service and retention of existing accounts. He has previous experience in industrial distribution sales and management. Mark earned a Bachelor of Arts from West Virginia University.

Walter | Haverfield LLP is pleased to announce that Mitchell Kolesar has joined the firm as an associate in its Real Estate group. Kolesar’s practice encompasses a broad range of business and real estate matters. He has extensive experience counseling clients on corporate business matters, real estate development, contract negotiations, and assisting new businesses with entity formation. For more information, visit www. walterhav.com.

Cavitch, Familo & Durkin Co., L.P.A.

LAW

Walter Haverfield LLP

Frantz Ward LLP

Hahn Loeser & Parks LLP

Walter | Haverfield LLP is pleased to announce that Zach Maciaszek has joined the firm as an associate in its Litigation group. Maciaszek has represented clients in a wide variety of litigation matters, including commercial contract disputes, tort actions, media law, and state constitutional issues. He has assisted in litigating cases in both trial and appellate proceedings in state and federal court, including cases before the Ohio Supreme Court. For more information, visit www.walterhav. com.

Bradley N. Ouambo joins Frantz Ward as an Associate in the Construction Practice Group. Brad focuses his practice on construction law and related litigation. He has experience in contract review and litigating construction, transportation and real estate cases. Brad has significant experience in all stages of litigation from handing complaints to deposition, settlement and trial. He earned his J.D. from Case Western Reserve University School of Law and his B.A. from Miami University.

Hahn Loeser & Parks LLP is pleased to announce that Casey McElfresh has been elected to the firm’s partnership effective January 1, 2020 based on his professional achievements, his depth of legal experience and his commitment to his clients. McElfresh counsels clients in the areas of litigation and commercial litigation. His experience involves fiduciary litigation, including defending clients in ERISA, employment benefits coverage, professional malpractice and property-rights disputes.

ACCOUNTING

Meaden & Moore David M. Knuff, CMI, has joined the international accounting and business advisory firm of Meaden & Moore as a Senior Manager in our State and Local Tax Services Practice Group. Mr. Knuff has over 25 years of multistate tax experience and most recently worked for a Big 4 Firm as a Senior Manager specializing in state and local tax with a concentration in sales and use tax.

Cavitch, Familo & Durkin Co., L.P.A. is pleased to announce Mary Sotera as shareholder. Mary has experience in both civil and commercial litigation with a primary focus in the area of family law. Her practice involves premarital planning; marriage termination; spousal support; child custody, visitation and support; adoption; guardianship; mediation; parent coordinating; and planning and agreement preparation for unwed domestic partners and representation of unwed partners in disputes.

Calfee, Halter & Griswold LLP is pleased to announce that Estate and Succession Planning and Administration attorney, Jaclyn M. Vary, has been elected Partner. Jaclyn practices with Calfee’s Estate and Succession Planning and Administration, Tax Law, Charitable Giving and Probate Litigation groups. She counsels individuals, fiduciaries, families and businesses in the areas of estate planning and administration, probate litigation, business succession planning and nonprofit law.

LAW

Calfee, Halter & Griswold LLP Calfee, Halter & Griswold LLP is pleased to announce that Litigation attorney, Lindsey E. Sacher, has been elected Partner. Lindsey practices with Calfee’s Litigation group in the areas of tort claims involving personal injury, property damage and other tort causes of action, as well as insurance recovery, antitrust and business and contract disputes.

18 | CRAIN’S CLEVELAND BUSINESS | January 27, 2020

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CRAIN’S CLEVELAND LOOK BACK | PLAYHOUSE SQUARE ``IN THEIR OWN WORDS “It took people from all walks of life sitting down and saying, ‘How do we get things done?’ ... I think everybody comes away with a better sense of community, and that has long-term positive effects for Cleveland.” ——Lawrence J. Wilker, president of Playhouse Square Foundation, 1981-1991

“When we were starting at Playhouse Square, the idea of downtown revitalization was like pulling teeth. Just nothing was going on.” ——Oliver “Pudge” Henkel, a lawyer with Thompson Hine who was the founding chair of Playhouse Square’s board of trustees

“I didn’t know it was impossible and the establishment didn’t know it was possible.”

KEITH BERR

——Ray Shepardson, who spearheaded the effort to save the Playhouse Square theaters from the wrecking ball

“Cleveland is such an incredible community that embraces the arts like no other region in this country.” ——Gina Vernaci, president and CEO of Playhouse Square since 2019

“Even though we are an arts-related organization, the foundation is run like a business.” ——Art Falco, president and CEO of Playhouse Square, 1991-2019

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The forecast for continued rapid absorption of prime warehouse buildings sounds unrealistic — until you consider the company behind the forecast. While absorbing lots of new warehouse space is a big deal for real estate owners, it pales compared to the millions that Amazon shoveled into Northeast Ohio real estate directly and through its real estate partners as it constructed distribution centers in Euclid and North Randall, where enclosed malls once stood. Another distribution center is rising in Akron at the former site of Rolling Acres Mall. Bob Brehmer, a longtime industrial broker and investor in the region who is a principal at Levelan

Playhouse Square set the stage for arts and culture renaissance Go to a show in the Playhouse Square district today and you’ll be part of an urbanist’s dream: live arts performed in beautiful theaters, steps away from a vibrant and colorful street scene with restaurants and shops — and a giant chandelier. And a 34-story apartment tower set to be completed later this year. It was not always so at Playhouse Square. Not remotely. There was once a real chance, in the bad old days for downtown Cleveland in the 1970s, that the theaters would be demolished. Once the hard, visionary work was done came the task of creating an organization that would make sure those theaters were filled, and that people would want to come. — Scott Suttell

``THE HISTORY Cleveland’s downtown renaissance has been a team effort. That’s particularly the case at Playhouse Square. Theater enthusiast Ray Shepardson in the 1970s made saving the shuttered movie/vaudeville theaters of Playhouse Square his passion. He began by staging shows there, most prominently “Jacques Brel is Alive and Well and Living in Paris,” which ran for 550 performances in the lobby of the State Theatre — at the time stripped bare to prepare for demolition. Shepardson brought energy to the restoration, aided by the expertise of people like lawyer Oliver C. Henkel Jr., who in 1972 obtained the first stay of execution for Playhouse Square. In August 1973, he became the founding chair of the board of the nonprofit Playhouse Square Foundation, which later approved an $18 million plan for the creation of a three-theater performing arts center. Lawrence J. Wilker arrived in 1981 as Playhouse Square’s first president. He helped raise a lot of money for the physical upgrades of the theaters. Wilker left in 1991 and was replaced by Art Falco, who oversaw the growth of Playhouse Square into the organization we know today. During Falco’s tenure, which stretched into 2019, Playhouse Square grew from five performance spaces to 11, with an average annual attendance of more than 1 million guests. He also established Playhouse Square Real Estate Services, making Playhouse Square the first performing arts center with a real estate division; completed the restoration of Playhouse Square’s historic spaces; created downtown Cleveland’s first Business Improvement District; and led development of the theater district’s hotel, restaurants and residential living.

Partners, which is constructing a 150,000-square-foot building in Streetsboro, said he hadn’t heard the reports about Amazon having a huge appetite for more industrial space in this region. But it wouldn’t surprise him. “If you look at what they are doing in other industrial markets around the country, it’s not out of the realm of possibility,” Brehmer said. Likewise, Randy Sacks, a senior vice president at Garfield Heightsbased Harsax Inc., an apartment and industrial owner and manager, said he is encouraged by the Amazon rumors even if he’s not counting on landing the company in a 300,000-square-foot building his family-owned company plans to start constructing this spring. “We’re confident that by the time we start getting the building into the

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Art Falco helped Playhouse Square grow considerably during his 28-year leadership tenure. | CRAIN’S FILE PHOTO

``WHY IT MATTERS TODAY Cleveland last week got a reminder of the powerful draw Playhouse Square has become when the Cleveland International Film Festival announced it will move to the district starting in 2021. The film festival cited the ability to be “part of a thriving arts district” with “an incredible entertainment complex with multiple-sized venues and enormous capacity” as being among the reasons for the planned move from its longtime Tower City Cinemas home. Playhouse Square has become the largest performing arts center in the country outside of New York, and it provides a home for the Cleveland Ballet, Cleveland Play House, Cleveland State University Department of Theatre and Dance, DANCECleveland, Great Lakes Theater and Tri-C JazzFest. Beyond the resident companies, it’s a powerful

ground, we’ll have someone for part of the space,” Sacks said. “The market is dynamic.” Bedford Heights Mayor Fletcher Berger confirmed that Scannell has rejiggered its plans to a single building but added 8 acres to the site, so the city is in the process of reworking its development agreement for the property. “It’s not all tied up in a bow yet,” Berger said. “It can still unravel.” He refused to discuss the rumor Amazon might be lining up to take the property because he does not have anything in writing, which is the only way he said he would discuss it. “What I do know, and what I am excited about, is that I believe something is going to happen on their land that has sat fallow for 40 years,” Berger said. Glenwillow Village Mayor Mark

draw for out-of-town performers of all stripes. The KeyBank Broadway Series, long a favorite of audiences, has continued to grow and now has a record 49,000 season-ticket holders. The vitality of the district as a place to play increasingly makes it a good place to live. Most dramatically, the look and feel of Playhouse Square is being altered by The Lumen, an apartment tower set to open later this year. It’s on a 1-acre site at the corner of Euclid Avenue and East 17th Street, across from the Connor Palace, where it’s replacing a parking lot. The 34-story Lumen will have 318 apartments, 550 parking spaces and 22,000 square feet of resident amenities. Falco, the former Playhouse Square CEO, continues to work as a senior adviser for special projects, focusing on real estate initiatives and, in particular, The Lumen.

Cegelka said no building permits have been taken out to finish the interior of the new structure on Victory Parkway. Building owners, their brokers and tenants usually won’t comment on a tenant taking space until a lease is signed. In the best telltale sign at the properties, CoStar listings for all three show they remain fully available. Although vast amounts of new industrial space are hitting the market, warehouse and distribution tenants are gobbling it up at a ferocious rate. With construction of almost 3 million square feet of industrial property last year in Northeast Ohio, the JLL Inc. brokerage firm put vacancy at the end of 2019 at 6%, up from 5.5% at the same time a year earlier. Stan Bullard: sbullard@crain.com, (216) 771-5228, @CrainRltywriter

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