On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the JOBS Act) which includes a number of changes to fundamental U.S. federal securities law policies. The JOBS Act will create fundamental changes in the way some companies raise capital. Here are some of the things companies need to know about the JOBS Act and the way it will affect their business.

Under the new Act, middle-market company CEOs, CFOs and their investment bankers are afforded a spectrum of investment opportunities to consider including:

• raising small amounts of money using the Internet
• staying a private company longer and raising money in private placements from sophisticated investors
• raising significant sums of money, up to $50 million, in a 12-month period in a new Regulation A+ hybrid offering mechanism
• tapping the U.S. capital markets in an initial public offering sooner than management may have considered.

As a result, middle-market companies no longer need to look to overseas markets (such as the AIM), choose debt over equity or go to the well too many times by approaching the same array of private equity investors without tapping into the broader U.S. investing public.

The JOBS Act creates an on-ramp for middle-market, non-public companies to access the IPO markets. The JOBS Act grants a number of important holidays from some key Dodd-Frank and Sarbanes-Oxley regulations for a large number of newly designated “Emerging Growth Companies” (EGCs) and loosens a number of critical restrictions on underwriter marketing activities on behalf of EGCs.  Some of the key changes include that EGCs:

• will remain exempt from the say-on-pay, say-on-frequency and golden parachute regulations in Dodd-Frank
• enjoyed scaled executive compensation disclosure
• will remain exempt from CD&A in go-forward proxy solicitations
• will not need their accountants to attest to the adequacy of the EGC’s internal controls
• need only present two rather than three years of audited financials in their IPO registration statements and prospectuses and two rather than five years of summary financial information
• enjoy scaled MD&A disclosure in post-IPO periodic reports and future registration statements

In an important shift in federal securities law, those seeking to raise capital for EGCs can test the waters by communicating with potential investors before a registration statement is file.  Underwriters can have analysts speak directly with issuers and investors, and EGCs can file confidentially with the SEC an initial registration statement screening sensitive information about the company from the public.

To increase the number of companies that can take advantage of these policies, Congress defined an EGC broadly to include an incredibly large swath of the economic landscape. A business need not be small to qualify as an EGC.

In fact, middle-market, non-public companies with pre-money valuations ranging from approximately $200 million to approximately $600 million can qualify as an EGC and stand much to gain (based on key assumptions on growth, dilution and the company’s capitalization table). Because of this, we expect a significant percentage of U.S. IPOs in the near future will come from EGCs.

Once a company achieves ECG status, the company can maintain this standing for up to five years after closing its first sale of common equity. During this time, the EGC would prepare to comply with the provisions of Dodd-Frank and Sarbanes-Oxley that were temporarily suspended for the EGC by the JOBS Act.

If an ECG however, were to exceed $1 billion in gross revenue or sell more than $1 billion in non-convertible bonds over a three-year period, then a company would lose its EGC status on the last day of the fiscal year in which its gross revenues eclipsed $1 billion or immediately upon closing the tipping bond issuance. Also, if an ECG becomes a large accelerated filer, then the company would also lose its EGC status.

In our next post, we will take a closer look at the JOBS Act and its effect on the IPO market, and in future posts we’ll examine how companies can take advantage of raising large and small amounts of money with a new Regulation A+ hybrid offering mechanism and Crowdfunding.

For more detailed information on changes affecting issuers and emerging growth companies under the JOBS ACT, please see our April 2012 Public Companies Alert.

Holland & Knight is a global law firm with more than 1,000 lawyers in 18 U.S. offices as well as Abu Dhabi, Beijing and Mexico City. Holland & Knight is among the nation’s largest law firms, providing representation in litigation, business, real estate and governmental law. Interdisciplinary practice groups and industry-based teams provide clients with access to attorneys throughout the firm, regardless of location.

The chapter’s board is comprised of volunteers that represent the disparate industries and markets that make up ACG’s membership. During their four- year term, these individuals will work to establish guidelines and policies that will enable the chapter to fulfill its mission of driving middle-market corporate growth. They also provide financial oversight and develop action plans and programs to grow membership and increase the overall value of the organization.

The eight new members announced for inclusion on the ACG National Capital Board of Directors includes some of the most distinguished business leaders in the region. They include:

• Alan J. Friedman – Alan Friedman is a CEO, board member and business consultant with over 40 years experience in helping companies grow and realize their potential. As a consultant, he delivers decades of knowledge in strategic planning, technology licensing and operations to his clients.

• Bob George, Director, Corporate Development at Exelis – Bob joined Exelis in 2011 as a director of corporate development in the company’s Strategy and Corporate Development Group. In this position, Bob is responsible for executing all aspects of acquisitions and divestitures including: sourcing, due diligence, negotiation and execution of transactions, and guiding post merger integration activities.

• Nuhad Karaki, EVP, COO at Inceptre Corporation – Nuhad Karaki is the executive vice president and chief operating officer of Inceptre Corporation. Nuhad is senior level management executive with over 23 years of experience directing highly successful programs in the intelligence community, DOD, DOS, DOJ as well as in the private sector. He is currently leading the restructuring of Inceptre Corporation to provide for strategic growth in new business areas.

• Terry McGovern, SVP, Finance and Treasurer at ICF International, Inc. – Terry is the senior vice president of finance and treasurer for ICF International, Inc., which partners with government and commercial clients to deliver professional services and technology solutions in the energy, environment, transportation, health, education, social programs, homeland security and defense markets. In this role, Terry is responsible for treaury, risk management, M&A, facilities, IT, corporate management, accounting, finance and banking operations for the company.

• Scott Meza, Shareholder at Greenberg Traurig LLP – Scott Meza has over twenty years experience assisting businesses in complex transactions, including mergers, acquisitions and spin offs of public and private companies and sophisticated equity and debt financings and recapitalizations. Scott has wide-ranging experience in managing these types of transactions for technology based companies as well as for companies operating in regulated environments like government contracting, telecommunications and health care.

• Tucker Sampson, SVP at Bank of America – Tucker Sampson is a senior credit products manager for Bank of America. In this role, he oversees the credit product needs of the company’s middle market clients in the National Capital region.

• Curtis Schehr, VP and GC at DCS Corporation – Curtis Schehr is the vice president and general counsel at DCS Corporation, where he specializes in Government contracts, mergers and acquisitions, employment law, internal investigations, corporate governance, ethics and compliance and securities laws.

• Greg Woodford, Managing Director at BB&T Capital Markets – Greg Woodford is a managing director at BB&T Capital Markets, where he advises clients on a wide range of strategic alternatives including mergers and acquisitions (both buy-side and sell-side), re-capitalizations, management buyouts, and capital formation. Greg has worked with both public and private companies ranging in size from $15 million to $250 million and on transactions involving many of the industry’s leading companies.

We want to congratulate the newest members of the ACG National Capital Board of Directors. The addition of such talented, experienced and knowledgeable individuals to the association’s leadership guarantees the continued success of the chapter.

This was just one of the trends that a panel of experts discussed in a recent article in Financier Worldwide.

In my previous experience in this type of market, budget cuts simply mean it’s more cut throat out there for companies. The battle for available budget dollars becomes more heated and having key capabilities in high priority areas will be vital for companies moving forward.

It’s for this reason that M&A activity actually increases in the government contracting market when federal spending is slashed.

As Craig King, partner at Arent Fox LLP noted in the article, contractors seek new business deals that bolster their portfolio of offerings with the capabilities needed to maintain some portion of the dwindling government programs and funds.

Small companies with highly valued intellectual property, technologies and product offerings that the government is focused on have the potential to not only survive but flourish in these environments. Such capabilities are also what attract potential buyers for companies looking to sell. M&A activity will increase and remain very active as larger government contractors begin to snatch up smaller companies that can bolster their portfolios with needed services.

But what are these hot capabilities and focus areas?

One focus area in particular that is currently high on the governments radar is cyber security. Cyber crime is increasing exponentially and new legislation is forcing organizations, government agencies and private enterprises to strengthen their security postures. Companies that can offer security services that meet agencies’ needs will have a significant edge over their counterparts.

But cybersecurity is only one hot area primed for government investment. Big data, data analytics, mobility solutions and other cost-saving technologies that cut recurring costs over time for the federal government are all expected to see continued investment despite slashed federal budgets.

Cuts to government spending create a more competitive contracting market where the companies that offer the technologies and services that the government needs most are most likely to survive and prosper. To add these technologies to their portfolios, large contractors will eye the innovative, niche contractors as acquisition targets, which will lead to an up-tick in M&A activity in the market and a consolidation in the contracting industry.

We caught these keynotes and panel discussions on camera and will be featuring videos from this year’s speeches in a series of posts on the ACG National Capital blog.

Last week, we featured a video of Accenture’s executive chairman, William D. Green, discussing the company’s acquisition strategy. In this week’s video, Bill talks to Chad Sweet, CoFounder and Managing Principal of The Chertoff Group, about training and education.

According to Bill, America’s most undervalued and underappreciated asset is its community college system. A product of the community college system himself, William would like to see businesses invest more in community college students and utilize the institutions to help train Americans in the skills and knowledge they need for tomorrow’s jobs.

The conference is an excellent opportunity for senior executives, investment banks, private equity groups, venture capitalists and others interested in mid-market corporate growth to come together to network, discuss business best practices and hear from prestigious political and business leaders.

This year’s event featured keynote addresses from an incredible group of speakers, including: William D. Green, Carly Fiorina, Tim Draper and Michael Chertoff. There was also a panel discussion about the current state of the government contracting industry.

We caught these keynotes and panel discussions on camera and will be featuring videos from this year’s speeches in a series of posts on the ACG National Capital blog.

In our first video, William D. Green, the executive chairman of Accenture, discusses the company’s acquisition strategy, why it infrequently acquires companies and why the recent acquisition of the George Group was a good fit for the company and its culture.

In our next video in the series, we feature William D. Green discussing education and how American companies need to invest in one of their greatest, most underutilized resources; the community college system.

Following an introduction by Kirk Rogers of Grant Thornton, Mr. Thompson took the unusual step of starting his presentation by asking for questions from the audience. Specifically, he asked attendees what they wanted to get from his presentation. Members and guests asked for his insights on growing a family business, his thoughts on attributes for entrepreneurial success, his strategies for challenging employees and his views on future growth for his business. Over the course of his talk, he managed to cover all of those key points and more.

Mr. Thompson described his childhood in ruralVirginia. His parents were schoolteachers, and he and his father helped make ends meet by running several businesses on the side.

By the time he went away to college, Mr. Thompson had worked at raising hogs, delivering produce (including the purchase of a school bus at age 15), landscaping, pest control and managing a concessions stand. He enjoyed each of his endeavors and came to associate entrepreneurialism with the freedom it provided him.

When he came home from the summer after his freshman year he worked at the local hardware store. He was the first African-American salesperson to work in the store, and the owner initially prohibited him from ringing up any sales at the register. It didn’t take long for Mr. Thompson to realize that he would always be happier when he worked for himself.

After earning his MBA, Mr. Thompson went to work at Marriott. He advanced quickly through the managerial ranks, but he never lost sight of his goal to be self-employed.

In the early 1990’s, he started Thompson Hospitality by buying 31 Bob’s Big Boy restaurants from Marriott and converting them to Shoney’s Restaurants. The deal that gave birth to his business also cemented in his mind one of the tenets of his business philosophy.

He worked hard with all of the parties involved to make sure that everyone walked away from the deal happy. He has kept that model top-of-mind ever since, and advised those in attendance to be creative in the deal-making process to make sure that everyone at the table comes away feeling like a winner.

Mr. Thompson detailed several challenges and successes in his time with the business. As for those initial questions, he said that he learned a great deal about running a family business from his years at Marriott.

It’s not always easy, but it has been a great joy to share his success with his family for 20 years. He attributed his entrepreneurial success to his great love of the work that he does and the fact that he is constantly challenged to improve his businesses.

When it comes to motivating his associates, he hires carefully to make sure that those who work with him are willing to be entrepreneurs in their own right, then he delegates responsibilities and recognizes achievements. In terms of growth, he believes that Thompson Hospitality will move into facilities management in the next few years, as that business draws on some of the knowledge he has gained in foodservice but is less capital-intensive. He hopes to grow Thompson Hospitality into a $1 billion a year business in the next few years. Given his energy and his track record of success, you would be hard pressed to find anyone to bet against him.

Planning an exit strategy can be easy to disregard. For a business owner or investor looking to get a return on their investment, not planning an exit strategy can create enormous and financially-devastating repercussions.

ACG National Capital recently held an Emerging Growth Roundtable featuring a diverse panel of experts, including: Frank Mellon, Attorney at Enterprise Business Law Group; Cameron Hamilton, Principal at The McLean Group; and Judy York, CEO of former NETCONN Solutions. This roundtable event was designed to provide executives at small and emerging growth companies with quality insights for building value and creating an exit strategy.

Here are some of the things executives need to think about when identifying and navigating an exit strategy:

• Set up the right structure – Setting up the right structure for your company from the start is important for both the buyer and the seller. For buyers, both S-corporations and LLC’s are very attractive since the buyer is able to effectively purchase assets for tax purposes. Also, for a buyer, an asset purchase amortized over 15 years provides a step-up in tax basis and intangibles, including goodwill.  This setup is especially valuable in the government contracting industry where buyers can avoid having to go through the novation process for non set-aside contracts.

• Build corporate value – Panelist Cameron Hamilton, Principal of the McLean Group, provided examples on value drivers for businesses, which included both qualitative and quantitative components.  Quantitative factors are drivers behind determining base value, e.g., return on investment/cash flow, and determines whether a company is in the game or not. Qualitative drivers, on the other hand, change the barrier to entry while driving the multiplier paid and changes the risk profile of the transaction package.

• Identify a retention plan – Failure to convince buyers that personnel will stay, as Cameron noted, can be a surefire way to kill a deal. Retaining key employees from a seller’s stance is also critical, as there must be plans in place to properly integrate staff through the exit process. There must be a retention plan in place, especially for key managers.

• Surround yourself with good people and measure – Exit options can vary with a company’s structure and time line. It’s best to get accounting advisors to address your specific situation and options, as well as have access to proper attorneys and good relationships with investment bankers. Also, scheduling audits, and having checklists and goals in place on areas of growth, retention and SAR’s can be good methods to employ, as these tactics can hold everyone accountable to a strategic growth plan.

Having an exit strategy could be very important for small companies in a number of hot industries right now. Large government contractors and other companies are looking to make strategic acquisitions in a number of markets, including: cybersecurity, health care IT, cloud, alternative energy and geospatial analysis. If your company is in one of these hot markets, it may be time to start giving your exit strategy a hard look.

Planning and incorporating an exit strategy is a critical component for any company. By putting aside the day-to-day and establishing a strategy in advance, companies can keep their options open and position themselves to be of greater value.

If you’re interested in attending the next Emerging Growth Business Roundtable on May 7 discussing Executive Compensation, please register at the ACG National Capital Web site.

This week we had the luxury of speaking with Greg Treger, Managing Director at Clearsight Advisors, a leading Merchant Banking firm specializing in providing strategic advice to growth oriented businesses in connection with Private Capital Raising, M&A and Financial Advisory Services.

How many years have you been attending the Annual Strategic Growth Conference?

Greg: I’ve been going to the event for five years or so now. I also attend other regional ACG events like the one in Philadelphia.

What continues to bring you out to the Strategic Growth Conference?

Greg: From personal experience, it’s a great local event to attend for people that are interested in the deal environment. What can attract people nationally is the DealSource, which serves as a great opportunity for private equity firms and investment bankers to set up a series of meetings to discuss multiple deal opportunities. Since our firm’s focus is national, providing an environment to meet with 15 PE firms in one day is incredibly effective and efficient. So in essence the event serves as a good opportunity for prospective business deals, which is always nice to see.

Have you experienced business deals for your firm as a result of the event?

Greg: Absolutely, we have introduced PE firms to current deal opportunities and been introduced to prospective clients owned by these PE Firms as a direct result of events like this.

What would you say is the difference between the Strategic Growth Conference and the other regional ACG events you attend each year?

Greg: I’d say the biggest difference between this event and some of the others is that D.C. is uniquely situated to address the marrying of technology and services from the public and private sectors. The impressive lineup of speakers, corporate attendees and entrepreneurs will foster lively discussions on how Technology is impacting both the public and private sector. This is a particularly exciting time to look at the intersection of technology, capital, politics and the entrepreneurial spirit.

Also, as we’re coming out of the recession we’re seeing businesses refocus on growth and consequently seeing more government businesses looking to get involved in the private sector and vice versa.

What are you especially looking forward to at this year’s event?

Greg: I am really looking forward to our corporate members hearing Bill Green, Executive Chairman of Accenture. As we all know, Accenture has a large presence in both the commercial and government services space, and few firms like Bill’s have experienced the type of success on both sides.

It will also be interesting to hear how technology is being utilized differently in the private and public sector, and best practices that can be leveraged between the two.
For more information on attending the upcoming Strategic Growth Conference at the Hilton McLean Tysons Corner on April 16 and 17, please visit the ACG National Capital Web site.

Recently, the ACG National Capital Blog featured profiles on some of the speakers for the upcoming event, which include: Carly Fiorina, Tim Draper, and William D. Green.

Although the list of speakers for this year’s event is long and extremely distinguished, the speakers are just one of the many reasons to attend the conference. We recently caught up with some of the event’s registered attendees to discuss their experiences on attending past events and why the Strategic Growth Conference is the “must attend” event of the year for business leaders in the Mid-Atlantic region.

Our first Q&A was with Ricky White, the Mid-Atlantic Transaction Advisory Services Leader with Grant Thornton LLP, and co-chair for this year’s event.

The upcoming Strategic Growth Conference (SGC) is the 18^th annual event. How many years have you been attending?

Ricky: This will be my fourth or fifth time.

What continues to bring you back to the event?

Ricky: I primarily go because of the people that are at the event. ACG as an organization is focused on the middle market and corporate growth, which can be organic or through acquisition. These growing, dynamic companies are those that Grant Thornton targets as clients so being able to meet the companies that are generating all the deal flow is a great opportunity to help me grow Grant Thornton’s business.

I’m really looking forward to DealSource, as there will be 20-25 private equity firms meeting with 16-17 investment banks for the opportunity to network with one another and potentially identify their next acquisition.

I’m also looking forward to connecting and furthering relationships with potential clients.

What differentiates the Strategic Growth Conference from other similar events?

Ricky: It’s the regional appeal. You’re right in the heart of Washington D.C. meeting with some very high profile people. There are a lot of financial and PE firms that come out to the event. This enables the firms to create relationships and be players when new companies come to the market. The event can also serve as a great tool to expand business.

When you look at larger, nation-wide events, you’re dealing less with the regional presence and more with global industries.

What are some of the benefits of attending the Strategic Growth Conference, from a business leader’s perspective?

Ricky: For the C-level executives you have the opportunity to meet other prominent executives and share knowledge. For example, for the government contracting community, there will be a panel of C-level executives speaking to where they see the government market going.

Tim Draper is opening the conference and can speak about Venture Capital for emerging tech companies and where that market is headed. Since he is familiar with this area, I also expect him to speak to the state of the local tech community.  Carly Fiorina can also bring some hi-tech knowledge as the former CEO of HP. She can also share her political experience as she once ran for the U.S. Senate representing California.

Also, attendees from private equity firms can highly benefit from meeting with prospective buyers or companies looking to sell. There are also opportunities to network with investment bankers.

Are there any particular breakout sessions or featured speakers at this year’s event that are particularly interesting to you? Why?

Ricky: Since my focus is on government contracting, I am looking forward to the CEO panel. I am also really interested in Tim Draper, as he’s a very well known name in the venture capital community. In fact, Tim used to have an office in the Northern Virginia area, but closed it when venture money dried up a bit during the dotcom bust. I’m interested to see what he thinks about technology corporations coming back to the D.C. area.

Overall, I must say that I am extremely proud to see the level of diversity that this event has attracted. We have a well known woman keynote speaker this year (Carly Fiorina), who is very successful in her field and will be sharing valuable insights and knowledge.

For the next Q&A in our series, we’ll feature Greg Treger, Managing Director at Clearsight Advisors, a leading Merchant Banking firm specializing in providing strategic advice to growth oriented businesses in connection with Private Capital Raising, M&A and Financial Advisory Services.

If you’re interested in additional information or attending this year’s Strategic Growth Conference, please visit the ACG National Capital Web site.

ACG’s Corporate Growth Awards are presented to individuals and companies that represent some of this area’s most successful businesses and business people. The winners are selected for achieving exceptional and consistently strong corporate growth strategies.

The winners of the 2012 Corporate Growth Awards were:

• Emerging Growth Company Award (Under $50M revenue): Tenable Network Security, Inc.
• Company Award ($50 – $250M revenue): A-T Solutions, Inc.
• Outstanding Growth Company Award (Over $250M revenue): Apex Systems, Inc.
• Deal of the Year Award (under $50M Transactional Value): Jorge Scientific Acquisition of Federal Concepts, LLC
• Deal of the Year Award ($50M – $100M Transactional Value): Paradigm Solution Sale to CACI International Inc.
• Deal of the Year Award (over $100M Transactional Value): SRA International Inc. Sale to Providence Equity
• Dealmaker of the Year Award – Commercial Provider: Louise Wager, TD Bank
• Dealmaker of the Year Award – Corporate Executive: Peter D. Schuster, SAIC
• Dealmaker of the Year Award – Investment Banker: Susan Gabay, Bluestone Capital Partners
• Dealmaker of the Year Award – Private Equity: Leslee Belluchie,  FedCap Partners, LLC

In a future post, we’ll be sharing some videos from the gala, which was attended by over 450 of the top corporate executives and dealmakers serving the Washington, D.C. metro area. To view the official press release announcing the winners, click HERE.

ACG National Capital’s veteran leadership and membership have participated in nearly every M&A transaction completed recently in the D.C. metro region. If you’re interested in networking and learning business best practices with the ACG membership, the 18^th Annual Strategic Growth Conference is a must-attend event.

This year’s event will be at the Hilton McLean Tysons Corner on April 16 & 17, 2012. The event will feature presentations from a distinguished list of featured speakers, including:

• Tim Draper, Founder and Managing Director of Draper Fisher Jurvetson
• Carly Fiorina, Chairman and CEO, Carly Fiorina Enterprises, former Chairman and CEO of Hewlett-Packard
• William D. Green, Executive Chairman of Accenture
• Martha Johnson, Administrator of the U.S. General Services Administration (GSA)

For more information on the Strategic Growth Conference, or to register, visit the ACG National Capital Web site.