Many of its smaller peers were swept up in a wave of consolidation during the financial crisis. Larger middle-market advisory firms such as Michigan's Conway MacKenzie Inc. and Chicago's Huron Consulting Group Inc. extended their reach downmarket by acquiring struggling boutiques.
"It used to be we'd hit up against smaller firms like us" when competing for new assignments, says John Russell , a senior analyst with Meridian. "Now it tends to be those [bigger] guys."
Nonetheless, the small family-owned and -operated firm of nine employees hasn't lost any notable market share. In fact, after recently adding offices in Cleveland and Cincinnati, Pittsburgh -based Meridian is looking to expand its reach south, currently working on adding an office in Baltimore or Virginia. And it has its local roots to thank.
"We have weathered the recession well, and we've got very good relationships with a number of banks that continue to give us dealflow," says Meridian founder and president Margaret Good . "A lot of clients value our relationships with local lenders."
It was those relationships, in fact, that enabled Good to build Meridian from the ground up, starting in 1988. Around that time, Good served as the vice president of finance for a local education company, Bradford Services Inc. When Bradford moved its headquarters to North Carolina in 1988, Good found she couldn't leave Pennsylvania.
Many of the bankers and lawyers she had worked with on past deals -- including a $350 million debt restructuring of the Pittsburgh and Lake Erie Railroad Co. -- encouraged her to start her own firm. She did, putting up the capital herself (she doesn't remember how much all these years later). "Initially, we did a lot of M&A and financing work; in the past five years or so, we've done more restructuring work," Good says.
Along the way, Good brought in her husband, Thomas Von Lehman, a former vice president at Pittsburgh glass and chemicals company PPG Industries Inc. ; their son Michael; and Thomas' brother Joseph.
Good says the family dynamic makes the firm efficient, keeping costs down for its clients. "We know each other so well and we know what our strengths and weaknesses are," she says.
Meridian represents sellers in both distressed and healthy sales, lines up financing for companies in need of capital and advises on restructurings, both in and out of court. It typically works with businesses valued between $20 million and $150 million.
In fact, it was the restructuring of Ohio slipper maker R.G. Barry Corp. in 2004 that gave the small Pennsylvania advisory its first national exposure.
After losing $21 million in 2003, R.G. Barry tapped Meridian to develop a turnaround plan. Meridian closed plants, outsourced manufacturing and renegotiated R.G. Barry's debt to better position the company to compete with low-cost global suppliers. R.G. Barry's performance has since rebounded. The company's stock, which traded in the $4 range in 2004, is now priced at around $10.30. Its market value has skyrocketed from a low of $14 million in 2004 to about $115 million.
Ironically, a June 2007 article in Time magazine about the R.G. Barry restructuring predicted that the "oceans of capital" held by PE firms would lead to less turnaround work for firms like Meridian. Of course, Von Lehman's response that "they're gonna need us someday," proved to be omniscient.
Indeed, even as the recession abates, Meridian is not wanting for restructuring work. Good says that, generally speaking, local businesses have returned to health. However, several industries tied to the housing market, including construction, building supplies and steel, have yet to recover. Meridian's recent roster of restructuring assignments includes Moraine Materials Co. of Franklin , Ohio; Cleveland-based Collinwood Shale & Brick Supply Co.; and Weave Corp. of Denver, Pa.
Weave, a high-end manufacturer of fabric for the furniture market, saw its sales drastically decline during the recession and struggled to recover. When the company shut its doors in November 2009, its senior lender, PNC Bank NA , wrote down about 44% of the book value on about $8.7 million in outstanding debt.
The U.S. District Court of New Jersey in Newark appointed Meridian as receiver for Weave, and the firm not only managed to reopen the business, but found a buyer. Investors led by American Silk Mills Corp. president John Sullivan Jr. acquired Weave for $1.9 million last year. Meridian estimates that PNC bank recovered about 82 cents on the dollar in the restructuring.
"We aren't specialists in any area, [rather] we find there's a classic business principle" to our work, says Good, adding that the firm's three advisory businesses "work hand in hand."
After all, she quips, "what do we know about slippers?Read more: http://pipeline.thedeal.com/tdd/ViewBlog.dl?id=38642#ixzz1bQU4BH2w
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