OCTOBER 2012

LASEE:MINE YOUR OWN BUSINESS

WE DID BUILD IT RALLYHARRISON: THE M&A MARKET UPDATE

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THE ISSUES:MINING LEGISLATION

VENTURE CAPITAL

WORKFORCE DEVELOPMENT

EDUCATION REFORM

TAX REFORM

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Governor Walker weighsin on Act 10 ruling.Click here to listen.

IBA MEDIA LINKIBA CONTACTSPresident......................................................Steve Kohlmann

Secretary......................................................John Weber

Treasurer.....................................................Casey Malek

Programing, State & National Issues...........Jeff Hoffman

Membership / Sponsorship........................Heather Baylor

Tim NerenzColumnist, CEO,The Oldenburg Group

Friday, October 19th, 7:00 – 9:00am

The Wisconsin Club,

900 West Wisconsin Avenue, Milwaukee, WI 

IBA Member - $30  • Future Members - $40

To register click here.

2012 Business Presentation Series

IBA Wisconsin October 19th

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In Business - For BusinessPolitical Advocacy • Education • Networking

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You'll notice in this issue we have a pretty diverse group of stories and information for you. Everything from information on the new iPhone 5 to the state of the M&A market, to State Senator Frank Lasee giving us his take on the mining issue. I mentioned to you in a earlier

issue that IBAW was evolving and I think this issue really shows that.

The summer months in Wisconsin are typically a great time to 'screw off'. Let's face it, Wisconsin weather can be brutal seven months of the year. During that time we have of darkness, cold and snow making us hunker down and do work because there is nothing better do to. Snow shoveling and windshield scrapping aside. So when the weather is nice it's time to take advantage and of it and go play. And play we do.

But now the kids are back in school and the weather is turning cooler. Geese are starting to fly south, leaves are turning colors, squirrel tails are getting bushy and people are getting back in a mindset of putting the toys away. I brought the battery chargers up for the motorcycles and plugged in the bikes (Sue & I both ride) just in case the weather gets foul fast and we can’t sneak out for just one more ride. The battery tenders are now blinking quietly red & green in our garage like some type of mad science experiment. Now’s the time for getting ready to get back to work and live in darkness for seven months. Something to look forward to no doubt (sarcasm).

Even the fall activity level is rising at IBAW. We’re getting invited to participate at events just about every week.  Emails are also coming in asking about topics &

speakers, payment for renewals are coming in and there's a just more activity all around.

Of course, all of this is great news when you have a sluggish economy and the IBAW has a view of all types of industries to connect with. All of them seem to be gearing up. I believe our state has come to the point of we're sick & tired of being sick & tired. With the recall of Gov. Walker behind us people are settling down and getting back to work. Sure we still have a national election to go through and that uncertainty is still out there, but Wisconsin has really never been a state to sit by. We have a super strong work ethic in this state and with evan the slightest blip up in the economy we'll benefit. 

Having the faith to hire workers and expand your business doesn’t come easy. The economy still seems to have its moments of being fragile and our nation’s debt is raging out of control. Of course there’s the big issue of the healthcare and what it means to business owners and the cost involved. Will the Democrats be in charge of the White House and keep the healthcare issue moving forward or will the Republicans get in and be able to repeal all or most of it? What will happen in the senate? It’s anyone’s guess.

So keep pushing forward Wisconsin. It's in our state motto and it's what we do best.

Back to WorkSteve Kohlmann, IBAW President

1.) Approval of Mining Legislation – There is roughly a $200 billion iron ore deposit in northern Wisconsin that could create upwards of 2,800 jobs that will be in this State for generations. Wisconsin is also home to some of the largest mining equipment manufacturers in the World which would create thousands of additional supplier jobs. Wisconsin needs a comprehensive overhaul of its ferrous mining laws to better compete with neighboring States and create a climate in which a mining company can develop a successful operation within the framework of protecting the surrounding environment

2.) Approval of a Venture Capital Bill – The State of Wisconsin remains woefully underfunded in the amount of venture capital raised for young, emerging companies that traditionally produce the most job creation. On a national stage, Wisconsin garners less than 1% (.55% to be exact) of total venture capital investment. While the IBA has reservations about the State of Wisconsin picking winners & losers with tax payer dollars at stake, a sensible “Fund of Funds” approach in which the State hires professional advisory firms that leverage their experience with matching private sector dollars is an innovative strategy that ensures industry experts are in charge of selecting the investments

3.) Educational Reform – The current education system is not adequately preparing the future workforce for the jobs that employers are looking to fill. Of the 925,000 jobs expected to be available in Wisconsin in the next decade, roughly 70% will require less than a 4 year degree. Tim Sullivan’s

“The Road Ahead” takes a provocative look at several suggestions to gear education towards the needs of the marketplace such as; a four year contract to complete an undergraduate degree, increase in tuition for students with more than1 degree, and investing in K-12 career path plans to open students’ eyes to available careers. ACT 10 has made it possible for school districts to get creative and innovate with the delivery of education. The IBA will continue to support educational policy that embraces a results driven environment that prepares students for the complexities of the 21st century work force.

4.) Workforce Development – A consistent complaint from IBA members is the inability to find & hire skilled workers. Earlier this year, Department of Workforce Development is promoting the availability of more than 44,500 jobs within the State. With rampant unemployment, matching the available worker pool with available positions has flummoxed business leaders throughout the State. On average 40% of all unemployed people nationwide have been unemployed for more than 27 weeks. Long term unemployment is a destructive problem that deteriorates skill level and needs to be appropriately addressed. Once again, Tim Sullivan’s “The Road Ahead” presents multiple solutions to the problems such as: regional alignment of work force issues, real time labor market information software, workforce development coordination through DWD, evidenced based budgeting, and overhauling the unemployment insurance system.

IBAW: Legislative Priorities for 2012 - 2013by IBAW Board of Directors

The IBAW has always been a voice for business when it comes to connecting business owners with elected officials in Madison and Washington DC and now more than ever it’s important we as business owners and those concerned about jobs, policy and the economy stay informed and involved when it comes to those issues.

The following is a list of issues we’ll be staying involved on and keeping you - and our legislators - engaged with . Special thanks to IBAW Board member Jeff Hoffman for crafting these points together.

THE ISSUES:

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5.) Tax Reform –Comprehensive tax reform is long overdue for the State of Wisconsin. The Manufacturing and Agriculture Tax Credit that was passed in the last biennium budget was a critical piece of tax reform designed to help the manufacturing and farming industries, however this did not go far enough. The IBA supports extending this type of credit to other business and industries, effectively eliminating the State Corporate Income tax of 7.9% which is the 18th highest in the country. Many pro-business States are already moving to reduce the corporate income tax and Wisconsin needs to follow suit. With a graying population the State of Wisconsin also needs to start looking at different alternatives to its’ heavy reliance on the Property Tax. Wisconsin is presently ranked #32 in terms of Property tax which disproportionately affects people on fixed incomes such as the senior community. This is a rapidly growing demographic in the State and without reform we will continue to lose our retirees to States like Florida. A consumption based sales tax is an idea to consider in order to provide property tax relief.

6.)

We all know about the severe recession in late 2008 and throughout 2009, but what has happened with business conditions since that time? Where do business owners find themselves today? The answer for many small businesses is at or near a similar position before the recession took place. While there have likely been internal changes as a result of the downturn, revenue and profit levels for many

businesses essentially mirror those of pre-recession levels – only four years later. Despite financial statements appearing to be in a similar position as 2007, the M&A landscape has become more favorable for small business owners.

Strategic buyers paying for growth.

Over the last two years, we have experienced a resurgence of strategic buyers come back to the marketplace. Large multi-national corporations have cash reserves above historical levels and are having a more significant influence on the direction and price paid in a sales process. Elevated cash reserves are allowing strategic buyers the opportunity to pay a full valuation for attractive businesses. For public companies, this phenomenon is even more evident. The higher cash reserves and relatively cheap cost of capital is enabling strategic buyers to be more aggressive in acquiring businesses that are immediately accretive to earnings. Given the harsh reality of the new normal, 1-2% annual GDP growth in the United States, corporations are now viewing acquisitions as a larger part of their longer-term growth strategy. This only increases valuation multiples for business sellers.

Private equity remains active.

The desire to spend capital on acquisitions is not only seen in large strategic buyers, but is also evident in the pent-up demand from private equity funds. When a private equity fund raises capital, they typically need to invest that capital within 3 to 5 years. Private equity funds are not paid unless capital is invested. If that money is not invested, they must return it to their investors. The last position a funds wants to be in is to give money back to investors without establishing a position. At this time, there is a tremendous

amount of uninvested capital (roughly $425 billion) on the sidelines. The overhang of capital has driven and is expected to continue to drive valuations higher as private equity firms are pressured to put that money to work through acquisitions.

Good (even pretty-good) companies are like gold in the marketplace. The lack of companies in the market today, combined with strong demand from both strategic and financial buyers, has resulted in high quality companies generating significant interest and healthy valuations. Grace Matthews recently represented the owners in the sale of a Midwest-based niche industrial products and service business. The business was marketed through a broad auction process that targeted, on the basis of the investment criteria, over a hundred private equity and strategic buyers. Despite a customer concentration issue, the owners received multiple bids that were above the targeted range. In addition to a healthy valuation, the owners were able to obtain a number of intangible benefits, a clear representation of the current M&A market environment.

While glancing at the financial statements, the current market environment may seem very similar to pre-recessionary levels. While many businesses have “recovered,” M&A activity surrounding owners has only become more favorable.

Grace Matthews, Inc. is a privately held investment bank that specializes in advising companies, entrepreneurs, and private equity groups on middle-market mergers, acquisitions, business sales, recapitalizations, and management buyouts. If you have any questions or would like further information, please contact Bill Harrison at 414-278-1120 or bharrison@gracematthews.com

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The Recovery: Current State of the M&A MarketBill Harrison, Grace Matthews

September IBAW meeting featuring Tommy Thompson.

Former Governor and candidate for Senate Tommy Thompson gave us a good overview on why he’s the best choice for the senate.

IBAW also honored Bruno Mauer, one of the founding fathers of IBAW, with a special Certificate of Appreciation for his hard work in forming IBAW back in the 1970’s.

 “Oh, if the people in Northern Wisconsin want an iron mine and the jobs that go with it, it’s TOTALLY fine with us.” – I bet no liberal group in Madison has ever said this. As you probably know, the legislation that would have made important changes to Wisconsin’s mining laws was defeated in the State Senate by one vote. One vote was enough to say no to the first jobs in a Wisconsin iron mine since the Jackson County Iron Company closed in 1983. It’s not so much that people wanted an iron mine in northern Wisconsin; they wanted a new opportunity, a chance to provide for their kids in an area of the state where it has become increasingly hard to make a good living. Minnesota and Michigan have been mining iron since 1884, and 95% of all the iron produced in the United States comes from these two states. Wisconsin has plenty of iron, our problem is, Wisconsin also has plenty of uncertainty in our permitting process. If it’s good enough for Minnesota and Michigan, it should be good enough for Wisconsin too. Iron County has an unemployment rate of nearly 11%. The mine there will create 700 mining jobs with an average wage and benefit packageabout $80,000. These jobs were expected to create another 2,100 jobs at restaurants, hardware stores, construction companies. Nearly 3,000 new jobs! Mining companies want a specific, reasonable timetable to get a yes or no answer from the DNR, and an assurance that if they follow the law, their permits will be approved. Michigan has specific, reasonable timetables, which is why G-Tac, the company who wanted to mine in Wisconsin, is now exploring iron deposits in the UP. Because there is a more favorable political and regulatory climate for mining.

  It’s like building a house. There are certain codes and requirements you have to meet to get your building permit approved, and if you do those things you’re going to get your permit. We need to make Wisconsin’s mining permits more like a building permit. You want to know you will not be in court for decades with lawsuit after lawsuit to stop or delay your building project.  To Liberals, it’s not about the environment- Modern mining is being done in many states. This legislation preserves the currently environmental standards already in place, ensuring that we protect our environment while making some common sense, science based changes to our mining laws. Unlike Wisconsin, our iron mining neighbors in Minnesota and Michigan have different regulations for iron mining than they do for mining copper, gold and silver. From a scientific standpoint, this makes a lot of sense. Iron ore doesn’t have the same chemistry as these other metals, and as a result It does contain sulfur, a key contributor to acid mine drainage.

 

LEGISLATIVE OPINIONMine Your Own BusinessFrank Lasee, State Senator

Some people seem to think that G-Tac exploring in Michigan is a political ploy. What they don’t understand is, mining companies

don’t invest in exploration to make a point.They invest to make a profit and build mines.

Mining in Wisconsin, or anywhere else in our country, requires meeting EPA and Army Corp. of Engineer standards to protect wetlands and groundwater. This bill also requires mining companies to replace wetlands they destroy with more wetlands. And you know we end up with a lake when the mine is done decades from now. Think of the new lake front property. The main reason the left opposes this legislation- The single greatest reason this legislation didn’t pass was because it would have eliminated the left’s favorite pastime, contesting mining applications--or any legislation passed by Republicans for that matter-- in court, forever. Many on the left have tried to say the legislation would have “robbed the people of their voice” and their ability to petition their government and give their input. Truth is, this legislation required at least two public hearings and a public comment period where people will be given the option to speak, for and against, the mine. In fact, the Department of Natural Resources even has the option to hold more hearings if they think it’s necessary, so… where’s the problem? The real problem for liberals is they won’t be able to stop a mine in court before it is built. They don’t want to have a permit issued ever, which is why the bill would only allow lawsuits to begin after the permit is approved or denied (still prior to the mine moving forward). It’s all about politics. As we’ve seen the Dem’s will take EVERYTHING to court, from Voter ID, to ACT 10 (twice), to redistricting, to the Wolf hunt, the goal of the left is to stop economic progress. Dems know that this mine will be a boon for the economy in northern Wisconsin, so they want to spin the issue so it looks like they want the mine and the jobs it would create, while using the court system to keep the mine from actually happening, thus satisfying their lefty environmental voting bases in Madison and Milwaukee who don’t want to see the mine ever. All while making it seem like they aren’t anti-jobs, anti-progress, anti-people. Plain and simple, this legislation keeps environmental standards in place that will protect our great natural areas for years to come, creates common sense standards for mining companies, and importantly, creates an opportunity for people to work, raise their families, and enjoy the beauty of Wisconsin’s northwoods. People in Northern Wisconsin want to mine their own business, and they’d appreciate it if the people in Madison and Milwaukee would mind theirs. 

This is what remains from Wisconsin’s last iron mine.

A crystal clear lake that has become the top scuba diving attraction in the mid-west.

IBAW Office Now Has Skype Video Feeds

The IBA offices now have Skype capabilities. so we are able to video conferences with anyone on the planet that has a webcam.

During the recent September meeting, IBA members were given a overview by Karen Kerrigan of the Small Business Entrepreneurship Council in Washington DC. Unfortunately the technologies gremlins came in full force on our first Skype and we lost the feed five minutes into our update. Thankfully, old fashioned cell phone technology came through and we were able to finish the update by cell phone. We hope to work out the technical glitches and be able to give high profile officials the opportunity to video feed with our membership.

VIDEO LINK: TED

Why Work Doesn’t Happen At WorkJason Fried has a radical theory of working: that the office isn't a good place to do it.

In his talk, he lays out the main problems (call them the M&Ms) and offers three suggestions to make work work. Click here to watch.

AT&T offers iPhone 5 on nation’s largest 4G network By Scott VanderSanden, President, AT&T Wisconsin

Unless you’ve been under a rock lately, you’ve probably heard the news that Apple has announced the new iPhone 5.

At AT&T, we are thrilled to offer the iPhone 5 on the nation’s largest 4G network. We’ve worked with Apple since the original debuted in 2007, and the newest iPhone is by far their best phone yet. And we’re proud that more customers choose AT&T for their iPhone than any other U.S. carrier.

The iPhone 5 is now available in any AT&T store in Wisconsin, starting at a suggested retail price of $199.99 for the 16GB model.

Not only are we proud that more customers choose AT&T for their iPhone, but we’re also proud of our customer-friendly plans. We offer our customers the flexibility to keep the iPhone data plans they

already have, or choose any of our individual or new Mobile Share plans.

With AT&T, not only do you get the fairest and most flexible rate plans, but you also get the nation’s largest 4G network with blazing fast LTE speeds. Our network also lets your iPhone talk and surf the web at the same time.

For more information on getting the iPhone 5 on AT&T’s network or for details on rate plan options, please visit www.att.com/iphone.

IBAW President Steve Kohlmann hosts a video chat with Karen Kerrigan from Washington DC.

We DID Build It Rally

IBAW was a featured sponsor of the recent WE DID BUILD IT rally at the Waukesha County Expo Center.

Several hundred business owners and their employees came to share their stories of hard work, success and perseverance. Speakers such as Lt. Gov. Kleefisch and Senator Ron Johnson also joined in to congratulate the crowd.

WTMJ-620 host Charlie Sykes emceed the event.

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