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Pioneer Press: Edina brokerage is a local mom-and-pop M&A specialist

 

Calhoun Companies was featured in the Pioneer Press on Sunday, September 21, 2014. Below is the Q&A with Andy Kocemba, president of Calhoun Companies.

 

Edina brokerage is a local mom-and-pop M&A specialist

By David Fondler

dfondler@pioneerpress.com

 

A couple of weeks ago, we reported on a study that found first-half 2014 national and international dealmaking at its highest level since 2007, just before the recession. The study, from global accounting and consulting firm PwC, reported national business transactions pushing a trillion dollars.

These are big deals being done by companies that think globally.

But other companies are thinking locally, and helping them is Calhoun Cos. in Edina.

For the second quarter, the business brokerage reported $4 million in total sales prices across 12 transactions; this on top of nine transactions in the first quarter.

These businesses are restaurants and shops, customer or business service companies, factories and health care.

Calhoun Cos. Andy KocembaMany are family-owned; none have outside investors. And the common denominator is that they are also being bought and sold.

"We certainly provide the same services as your larger M&A advisers and investment bankers, we've just carved a nice niche in that smaller range, and it served us well," said Andy Kocemba, president of the company, which he co-owns with his dad, Wally.

In a recent interview, Andy Kocemba discussed small-business transactions in the Twin Cities and beyond. His answers are edited for context and clarity.

 

Tell us a little about Calhoun Cos.

"It was founded 1908 by a woman out of South Minneapolis, so the name comes from the lake. Back in those days, if you were in real estate, you did whatever it took, so it was commercial, residential real estate.

Through the middle of the century it expanded into property management, insurance, business brokerage, as well the commercial and residential. Pretty big presence in all of those.

"In the 1980s, some of the businesses were sold off. There still is a Calhoun Insurance, and we're primarily a business brokerage. We still do some commercial real estate as well by virtue of the fact that the two are sold together.

"My dad and I bought the company in 2011, after I had previously worked here as a sales agent since 2003. He had worked here since 1993. So we both worked on the sales side, bought the company and moved into ownership."

What kinds of companies are you working with?

"We work with businesses in all industries, all different types. If you were to define a niche, it would be more size-based. We're talking primarily owner/operator business where the owner is there working.

"Service companies always do pretty well because the margins are good. So you can get a profitable service business for relatively low overhead, so that's always attractive to a business buyer. At the same time, people always have liked manufacturing operations, for almost the opposite reason -- that you're buying a lot of stuff; people like the assets. So those always do well.

"Right now, we're seeing trends in anything health-related. We do home health care, we do assisted living, and you can see population trends driving this."

What kind of year are you having?

"Through August, we've actually closed 33 transactions; that's pretty on track, maybe a little higher, as compared to years past. We always see a bigger push to year-end. Business transactions take a while to come together; it's a bit of a longer sales cycle, so based on the activity I've seen this summer, I think we could be in for a big year end."

How did the recession change things for your business or clients?

"What we've seen is through the recession and post, multiples tend to stay mostly the same, maybe they tick up slightly.

"Everybody's hearing about this wave of baby boomers that are coming, and the talk has always been about what happens when they decide to sell their businesses and retire. What really changed through the recession is that wave got pushed back a few years, people started working longer. They had to.

"If you were looking at pre-recession retirement account balances and business values, people were saying, 'I'm sitting pretty, we're all going to sell in 2014 or 2015.' I think that's not the case anymore.

"I read a fact that for the last two quarters, baby boomers have been the top seller group; they've also been the top buying group, which kind of surprised me. That goes to show that this wave of baby boomers is going to be with us for a while."

Did the recession affect the financing side?

"Yes, but somewhat indirectly. The money was still there, banks were still willing to lend on business acquisitions, but it was more a function of fewer businesses and deals that fit into their box. Bank standards didn't change, but market standards did. Banks always wanted three years of upward trends. Then, in comes 2008-2009, and every business takes a backslide. So it was kind of an adjustment; it took banks a couple of years to realize we still need to lend."

And now it's picking up?

"It is; they've adjusted their parameters a little bit, they've realized they have to get money into the market. At the same time, businesses are looking better and better, so it's coming together."

Where do you see the small-business sales market trending?

"Our traditional seller has always been the retirement age, our traditional buyer has always been sort of middle age, tired of corporate, wants to finally get out on their own and do something.

"I think what we're seeing now is a younger group of people, much less anchored into long-term positions, much more fluid. Younger people that maybe want to build a business with the intention of selling it."

 

Click here to read the full article.

 

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