Dallas dealmaker John Willding recently moved his practice from Fox Rothschild to Stinson, citing its “world-class” corporate finance practice and “great Midwest culture.”
Willding, who focuses on middle market mergers and acquisitions and private investment funds, gained familiarity with Stinson by working on a new debt capital fund with New York partner Richard Lomuscio and representing a large family office with Kansas City partner Judd Treeman.
Over the last decade, Willding has also practiced at Barnes & Thornburg and Strasburger & Price, where he spent the majority of his career.
In the following Q&A with The Texas Lawbook, Willding describes recent deals he has handled, elaborates on a “significant pickup” in middle-market M&A deals and identifies other trends he is observing.
Texas Lawbook: Why did you make the move to Stinson?
Willding: I joined Stinson because of its world-class corporate finance practice and great Midwest culture. Stinson, headquartered in Kansas City and Minneapolis, has the talent and client base of a Wall Street firm yet is purposefully “mid-sized” with about 450 lawyers. We are able to execute on sophisticated deal work at competitive rates, which is why we are the firm of choice for national companies’ most critical matters.
The Lawbook: Have you worked with or across anyone at the firm before? Can you describe those deals?
Willding: I’ve had the pleasure of working on deals with Richard Lomuscio in our New York office and Judd Treeman in our Kansas City office. With Rich, I helped structure a new debt capital fund for alternative investments. Judd and I worked together representing a large family office in a joint venture with a Texas developer on a ground-up mixed-use real estate development. Stinson excels in projects like these because our corporate finance and real estate practices are incredibly experienced and widely recognized for their expertise.
The Lawbook: What are two or three deals you have handled recently?
Willding: I recently represented a family office in the sale of a defense technology firm to a New York-based private equity group that specializes in the defense sector. I’ve worked with this client for a long time – 17 years, starting with the family patriarch’s first deal – and we’ve completed several deals together since. The process was smooth, the closing was painless, and the valuation multiple was quite attractive.
I also recently worked with a new real estate fund based in the mid-Atlantic that specializes in ground-up development for public storage facilities. We structured this as a Series LLC fund rather than a blind pool fund so that each facility or development could have its own set of investors, be legally separate from the other facilities or developments and require a relatively modest capital raise to move the project forward.
It’s exciting because this structure and approach can be repeated, which the client hopes to do across the Sunbelt, Texas and the Midwest, regions where Stinson has a strong presence. This structure is optimal because some investors will likely want to be involved in every deal, while others may only want to participate in specific markets like Frisco, Texas, or Kansas City, Missouri.
The Lawbook: What trends are you seeing in your deal practice?
Willding: There has been a significant pickup in middle-market M&A deals (less than $250 million in transaction value) across multiple industries, including technology, manufacturing and health care. It’s not a shift away from the mega energy deals that have dominated the Texas market in recent years, but rather additional and new middle-market deals that have begun to factor higher interest rates into the capital stack and valuations. This is encouraging because although an M&A deal can be closed in 60-90 days, the total time invested when private equity is scouting a deal is more typically six to nine months. It’s imperative that buyers choose wisely and that sellers have done their pre-sale “housekeeping” (quality of earnings, tax and succession planning, interviewing and selecting the deal team) well in advance to increase the likelihood of a successful closing.
I am also seeing increased fund formation and real estate joint venture work. The fund work is coming from emerging sponsors and entrepreneurs looking to scale and execute on a strategy, whether it’s a debt capital fund lending to borrowers squeezed out of traditional bank lending or an opportunistic real estate fund looking to do both ground-up development and acquire existing properties that may be financially distressed due to high interest rates or other factors. I should also note that the SEC’s new private fund rules have increased the regulatory burden on small- and medium-sized funds – often referred to as Exempt Reporting Advisers – as well as certain real estate funds that are more likely than ever to be considered by regulators to be “dealing in securities” and thus subject to additional regulation under the Investment Advisers Act of 1940 and similar state regulations.
The Lawbook: What are your expectations for deal activity for the rest of the year?
Willding: I’m optimistic because the pipeline of deals is growing across multiple industries despite this being a presidential election year, which typically causes some sellers to pause, wait and see where tax and monetary policy goes. This time, however, interest rates are so high that alternative – more equity, seller notes and higher rollover – deal structures have been tried and established and that, along with more realistic seller expectations on valuations, have allowed deals to move forward as most believe that rates are going to come down instead of go up for the first time in recent years.